Despite a decline in global cases and deaths since the most recent peak in late April, countries with low COVID-19 vaccination rates, including the Philippines, are at risk of battling another resurgence in infections that may set back prospects for economic recovery, a research from British banking giant Standard Chartered said.
In its recently released global research “Navigating a vulnerable recovery,” Stanchart said the global economy would rebound this year as economies reopen and vaccination rollouts gain momentum.
However, downside risks are seen to come from a more extensive resurgence of pandemic cases from new variants, which could force the extension or re-imposition of mobility restrictions and a more sustained surge in inflation that could damage consumer confidence and force a swifter tightening of monetary policy.
In Asia, for instance, the research noted that activity had turned declined again with a resurgence in COVID cases.
“India, Singapore, Indonesia and Japan are unlikely to return to pre- pandemic GDP (gross domestic product) levels until third quarter 2021; Malaysia not before fourth quarter 2021; and Thailand and the Philippines not at all this year,” the research said.
“Vaccination rates are a key differentiator within this group,” the research said, noting that well over half of Singaporeans had received at least one vaccine dose, while the rate was below 25 percent in India, Indonesia, Japan, Malaysia, Thailand and the Philippines as of early July, albeit rising rapidly.
Stanchart has downgraded its 2021 GDP growth forecasts for these economies, with the exception of Singapore, where activity has been resilient despite restrictions. In the case of the Philippines, Stanchart expects GDP to grow at a subdued pace of 4.6 percent this 2021, following a 9.6-percent contraction in 2020.
Next year, Philippine GDP is projected to grow at a faster pace of 6.6 percent, while growth in 2023 is projected at 5.9 percent. But the slow pace of COVID vaccination rollout and potential new waves of cases in the Philippines even pose risks to these forecasts, Stanchart said.
Private-sector demand is seen likely to remain subdued on still-soft consumer and business sentiment, while public infrastructure investment may pick up only by mid-third quarter this year, at the earliest, the research said. As such, the research said the Bangko Sentral ng Pilipinas (BSP) may keep its key interest rates steady to support growth through 2021.
“New COVID infections declined following nationwide lockdowns in May, but they remain elevated and above 2020 highs. New cases have increased recently following the relaxation of restrictions; a sharp increase in the coming weeks could lead to the re-imposition of lockdowns, further dampening sentiment and growth,” the research said.
At the current rate of vaccination, Stanchart said the Philippines was unlikely to meet its target of reaching herd immunity by end-2021.
In the UK, the research noted that the highly-transmissible Delta variant had delayed reopening despite a relatively high vaccination rate. Stanchart sees risk that the UK experience would be repeated in other countries in the coming months, particularly those still in the early stages of vaccine rollout. In the EU, 90 percent of cases were expected to be of the Delta variant by end-August.
Furthermore, achieving herd immunity against the Delta variant could require a higher percentage of the population to be vaccinated, possibly as much as 90 percent, the research said. Next-generation vaccines that target new variants are in development, and are seen to be the longer-term answer to the threat from COVID mutations but given that many of these vaccines are still in the early clinical trial stages, Stanchart said they were unlikely to be available for distribution before late 2021 or early 2022.
“Scaling up production could be a challenge given that many vaccine facilities will be at or near capacity, though new production facilities will be coming online. These next-generation vaccines are likely to see the same unequal distribution between high- and low-income countries as the existing vaccines,” it said.