Think tanks see Delta further slowing PH economic recovery

MANILA, Philippines—The threat from the more contagious Delta variant (formerly Indian) of SARS Cov2, which could prolong the pandemic and quarantine restrictions, would make the Philippines among “losers” in long-term economic scarring and keep potential below pre-pandemic levels until 2025, according to think tanks on Tuesday (July 27).

“The Philippines has eased restrictions in the past month, but the likelihood of daily infections rising now that the Delta variant has arrived are high,” Moody’s Analytics senior Asia-Pacific economist Katrina Ell and associate economist Dave Chia said in a report.

Due to risks from the Delta variant, Moody’s Analytics said the Philippines needed additional fiscal stimulus to do the heavy lifting.

“The Philippines will likely introduce a further $3.6 billion stimulus package shortly to keep the government’s downwardly-revised GDP target for 2021 in sight of between 6 percent and 7 percent this year,” said Moody’s Analytics.

“Even if this latest package is forthcoming in the Philippines, we maintain that our existing GDP forecast for 2021 of 4.9 percent has downside risk,” said Moody’s Analytics, referring to the proposed Bayanihan 3 bill pending in Congress.

In a separate report, UK-based Oxford Economics said it expects the Philippines and India “to experience especially large losses given sharp falls in investment and higher unemployment rates” until 2025.

Oxford Economics lead Asia economist Sian Fenner said that across the Asia-Pacific, regional GDP in 2025 was projected to be 2.9-percent or $700-billion below pre-pandemic estimates.

In its economic scarring scorecard, Oxford Economics said “India and the Philippines are the main losers, with GDP levels estimated to be more than 8-percent lower” four years from now, compared to their pre-pandemic potentials.

“Our scorecard supports our forecasts that India and the Philippines will experience the largest declines in output relative to pre-pandemic trend growth by 2025,” Oxford Economics said.

Oxford Economics’ estimates showed that the shortfall in India and the Philippines’ GDP in 2025 relative to pre-pandemic expectations will be equivalent to 1.5-1.75 years’ worth of growth lost to the pandemic.

“Ranked at the bottom of our scorecard are India, the Philippines, and Indonesia. All three have struggled to contain outbreaks since the pandemic took hold,” Oxford Economics said.

“At the same time, the fiscal response has been meager in both India and the Philippines, given the stringency of their lockdowns,” it said.

Direct fiscal spending to fight COVID-19 as a share of GDP was just less than 2 percent in the Philippines,  only higher than those in India and Vietnam in the region, Oxford Economics’ estimates showed.

“This has led us to lower our investment and employment forecasts significantly,” Oxford Economics said.

“Indeed, investment in the Philippines was still 25-percent below pre-COVID-19 levels in the first quarter of 2021 and the unemployment rate in the second quarter was nearly double what it was before the pandemic,” it said.

Oxford Economics gave the Philippines a score of negative 1.2 in its long-term economic scarring scorecard based on five metrics—decline in activity growth in the crisis year; recovery of potential GDP drivers; health-related scarring; structure of the economy; and policy offsets.

The Philippines’ overall scarring score was the worst among 14 countries covered by Oxford Economics’ report.