PH’s pandemic scar expected to be among deepest in region

The government’s “meager” fiscal stimulus amid the longest and among the strictest ongoing COVID-19 lockdowns in the region will inflict “deep scarring” into the Philippine economy for up to several years from now, UK-based Oxford Economics said.

In a report on Friday, Sian Fenner, lead Asia economist of Oxford Economics, said the Philippines was expected to “experience one of the largest permanent losses in output” in Asia-Pacific, such that gross domestic product (GDP) in 2025 was estimated to be 8.4-percent lower than what would have been the level if the pandemic did not happen.

Oxford Economics said the Philippines’ GDP shortfall four years from now would be equivalent to 1.75 trend-years of lost growth, the biggest in Asia-Pacific.

“Not only has the Philippines struggled to contain outbreaks since the pandemic took hold, the fiscal response has been meager considering the stringency of its lockdowns. This has led us to lower our investment and employment forecasts significantly,” Oxford Economics said.

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

As such, Oxford Economics now projected the Philippines’ potential GDP to average 4.6 percent during this decade.

Prior to the pandemic, the Philippines’ GDP growth was expected by Oxford Economics to average by a higher 5.1 percent for the period 2020 to 2029.

Despite the less optimistic 10-year outlook, Oxford Economics said the Philippines would remain “one of the fastest growing economies in the region and globally.”

In Asia-Pacific, Oxford Economics’ 2020-2029 forecasts placed the Philippines only behind Vietnam, India and China in potential GDP growth, outpacing most of its neighbors such as Indonesia, Malaysia, Thailand, Singapore and South Korea.

“Although we expect the contribution from labor to soften over the long term, the Philippines will continue to benefit from the so-called ‘demographic dividend’ — that is the boost to growth from labor supply growing faster than the dependent population,” Oxford Economics explained.

“What’s more, a high savings rate and still very favorable returns on capital also augur well for investment, capital stock, and productivity, despite a somewhat softer outlook due to the pandemic. Productivity growth will also continue to benefit from a catch-up with the US,” it added.