The recent revert to stringent lockdowns to contain COVID-19’s more infectious Delta strain will slow down the Philippines’ economic recovery and possibly result in below-target growth this year, think tanks said on Thursday.
In a report, the Japan Center for Economic Research (JCER) slashed its 2021 gross domestic product (GDP) growth forecast for the Philippines to 3.2 percent from its 5.1-percent projection in June. The updated forecast was also below the government’s 4-5 percent goal.
JCER estimated year-on-year GDP growth during the current third quarter to decelerate to 3 percent from the 11.8-percent jump in the second quarter.
The think tank projected third-quarter GDP to match the second-quarter output or zero quarter-on-quarter growth, an improvement compared to the 1.3-percent quarter-on-quarter contraction during the April to June period.
Year-on-year growth in the fourth quarter was seen at 2.4 percent. JCER nonetheless forecasted a faster 7.4-percent GDP expansion for 2022, more optimistic than the previous 6.8-percent projection and within the government’s 7-9 percent target band.
In the Philippines and across Association of Southeast Asian Nations (Asean)-4, JCER said “the strict lockdowns extended in some of the countries in response to the Delta variant infection will prevent the [region’s] economy from clearly recovering for some time to come.”
Asean-4 in JCER’s report covered the Philippines, Indonesia, Malaysia and Thailand. This region was expected to post GDP growth of 3.3 percent this year, and 5.6 percent next year.
Separately, the Washington-based World Bank said that “the new mobility restrictions risk slowing the recovery momentum following growth in manufacturing, revenue collection and bank lending in July” in the Philippines.
The World Bank’s Philippines monthly economic developments report for September took note of weaker labor market conditions last July as the underemployment and labor force participation rates “worsened” despite an improvement in the jobless rate.
The labor force—Filipinos aged 15 and above who had jobs or were jobless but looking for employment—declined to 44.74 million last July from 47.41 million in April. Meanwhile, the number and rate of underemployed—those seeking longer working hours and higher-paying work than their current job—both climbed to 8.69 million and 20.9 percent, respectively, at the start of the third quarter.
“The economic managers cited renewed risk aversion to COVID-19 and the exhaustion of job seekers amid the difficult job market as reasons for the lower labor force participation … The higher underemployment rate is caused by an increased number of individuals who want more earnings, poorer job quality and the tight quarantine restrictions in several provinces,” the World Bank noted.
The World Bank also warned that while factory output jumped with record-high three-digit year-on-year growth rates in July, “new stringent restrictions threaten to stall the recovery.”