Despite Q2 growth, PH seen still among last to recover from COVID-19 crisis

Even as the Philippines already ended its pandemic-induced recession, economic recovery will remain the region’s laggard as the prolonged COVID-19 quarantine continued to temper consumer spending, think tank Moody’s Analytics said Monday.

Despite the 11.8-percent year-on-year gross domestic product (GDP) growth in the second quarter due to low-base effects, the 1.3-percent quarter-on-quarter contraction compared to the first-quarter output meant that “the early signs of recovery in the Philippine economy have proved short-lived,” Moody’s Analytics said in a report titled “Philippines’ disappointing Q2 performance.”

The second quarter reversed the growth recorded in the preceding three quarters, which economic managers had touted as an indication of recovery alongside gradually easing restrictions.

Moody’s Analytics said “the quarterly contraction reflects the effects of relatively strict movement controls that were in place for most of the June quarter,” including the two-week revert to the strictest enhanced community quarantine (ECQ) in National Capital Region (NCR) Plus—Metro Manila and four surrounding provinces accounting for half of the economy—in April.

“The Philippines has struggled to contain COVID-19 cases, and the country has been recording high infections through most of 2021 … The sluggish vaccine rollout coupled with decentralized health advice and poor adherence to social distancing measures are to blame,” Moody’s Analytics said.

“Conditions are not much better in the current quarter, as movement controls remain in place along with elevated infections,” it added. Metro Manila and provinces like Bataan and Laguna returned to ECQ restrictions this month.

Estimates of the state planning agency National Economic and Development Authority (Neda) had shown that the various community quarantine classifications, which took effect this month had heightened restrictions over a total of 68 percent of the economy, and will cost the conomy P151 billion in output losses per week.

Moody’s Analytics noted that private consumption during the second-quarter was 9.2-percent lower than prepandemic levels in 2019 “as mobility restrictions suppressed domestic demand.”

“The slow pace of vaccination rollout remains a major drag and downside risk to the Philippines’ economic recovery —only 10 percent of the total adult population is fully vaccinated. The Philippines may be forced to prolong the costly mobility restrictions if the current outbreak does not soon abate,” Moody’s Analytics warned.

As such, Moody’s Analytics said the Philippines was still expected to be among the last in Asia to regain prepandemic output levels, seen by the middle of next year.

Moody’s Analytics said that while headline inflation was easing in recent months, “the possibility of further rate cuts is limited at this stage, although monetary settings will remain accommodative for the rest of 2021” as the Bangko Sentral ng Pilipinas had acknowledged that “economic recovery was under threat from extended lockdowns.”

“Fiscal policy will therefore need to assume a primary role in cushioning the fallout on impacted households from lost incomes but also heightened uncertainty in near-term prospects,” Moody’s Analytics said. INQ