Economists polled by Barcelona-based think tank FocusEconomics have again tempered their growth expectations for the Philippines to 4.6 percent this year due to a surge in COVID-19 cases during the third quarter that slowed economic recovery.
FocusEconomics also flagged possible political risks due to President Duterte’s decision to run as vice president in next year’s national elections.
Its Sept. 21 report showed a slightly lower consensus forecast for the Philippines’ gross domestic product (GDP) growth compared to 4.7 percent in August. The latest average projection remained within the government’s downscaled 4-5 percent target range.
“After GDP growth rebounded sharply in the second quarter, largely due to a supportive base effect, the economic landscape appears to have deteriorated in the third quarter. A surge in daily COVID-19 infections that began in July forced a gradual tightening of restrictions that culminated in a two-week lockdown of the capital in August,” FocusEconomics said, referring to the most stringent enhanced community quarantine imposed in Metro Manila last month.
“The services sector likely fared worse than the manufacturing sector, given its susceptibility to restrictions. That said, the manufacturing PMI (purchasing managers’ index) slid into contractionary territory in August, on the back of supply-chain disruptions and faltering output,” FocusEconomics said.
Demand dynamics
“Moreover, growth in both exports and imports receded in July and August, indicating deteriorating demand dynamics, while remittance growth hit a six-month low in August, likely inhibiting consumer spending in the period,” it added.
For FocusEconomics, “a sluggish vaccination campaign and shortages of health-care workers bode poorly for the economy in the final stretch of the third quarter.”
FocusEconomics was more bullish about the Philippines’ economic prospects for next year even as its panelists also lowered their growth estimate to 6.8 percent from 7 percent previously. The government targets 7-9 percent GDP expansion for 2022.
“GDP growth should gain steam in 2022, boosted by higher consumer spending and an improving external sector, although milder public spending and the ongoing pandemic will likely temper the acceleration,” it said.
However, FocusEconomics warned that “next year’s election is a key risk, with the President’s decision to stand for vice president—the presidency is limited to one term—potentially causing political conflict.”