PH faces long road to economic resurgence

President Duterte’s economic team entered 2021 with a rosy outlook for the economy, except that few months later, the more infectious Delta strain reared its ugly head and forced it to slash its growth expectations to 4-5 percent from 6.5-7.5 percent.

Private sector economists said a turnaround this year would mainly be due to the low base from the Philippines’ worst postwar recession last year, which shrank the value of goods and services produced in the country by 9.6 percent.

This was evident in the 11.8-percent jump in gross domestic product (GDP) during the second quarter, which ended the five straight quarters of year-on-year contraction. Yet, the economy contracted by 1.3 percent between April and June after growing 0.3 percent in the first quarter.

And then Delta began to wreak havoc in the third quarter, dimming hopes of an economic comeback.

Laggard

The state planning agency National Economic and Development Authority sees the country reverting to a prepandemic growth late next year or early in 2023, making the Philippines a laggard in the region.

In its latest report, Singapore-based United Overseas Bank (UOB) said “the Philippines is expected to face an economic setback in the third quarter as the resurging COVID-19 cases had forced the government to further extend stricter containment measures in the Manila capital region [in August].”

It also took note of threats from new COVID-19 variants plus the slow rollout of vaccines in the country.

“Externally, there are growing concerns about a softer-than-expected global growth recovery and potential risks of heightened financial market volatility amid adjustments in monetary policy in major economies. This could undermine business sentiment, external trade and investment flows and subsequently further delay a stronger domestic economic recovery into 2022,” UOB added.

Still, it kept its 2021 GDP growth forecast for the Philippines at 5.5 percent—among the most optimistic projections—due to “continued policy support, a persistent expansion in global demand and favorable base effects.”

“Owing to the prolonged COVID-19 lockdown associated with new variants of concern, we now see the Philippine economy fully recovering from the impact of the pandemic late next year (fourth quarter of 2022), at the earliest,” it said.

“The expected long-term scarring effects of the pandemic will lead to structural changes in the nation’s economy postpandemic, undermining the strength of the economic revival in the short term,” it added.

Elections

For 2022, UOB projected a 6.5-percent growth, below the government’s 7-9 percent goal, noting that the 2022 presidential elections would add to economic uncertainties next year.

Oxford Economics, on the other hand, had among the most pessimistic GDP growth forecasts for the Philippines this year. It sees the country growing just 3.5 percent, below the government target.

Earlier in the year, the UK-based think tank had been quite bullish as it estimated an 8-percent GDP growth for the Philippines for 2021.

In a report last week, Oxford Economics said that across Asia-Pacific, it expects “a stronger performance in the fourth quarter and early 2022 following a difficult third quarter, in which GDP will have fallen quarter-on-quarter in four of the 12 largest economies in the region and barely grown in China.”

“This robust momentum will be sustained throughout 2022 in the countries that have underperformed in 2021—Indonesia, Thailand, Malaysia and the Philippines,” Oxford Economics said in the Sept. 16 report titled “Delta-related drags in 2021 but stronger 2022 in view.”

Forecasts

Oxford Economics projected the Philippine economy to expand by 7.5 percent next year, which would be the strongest growth in the region alongside similar forecasts for India and Vietnam.

“Based on the recent progress of their vaccination programs, India, Indonesia, Thailand and the Philippines are likely to have achieved a level of vaccination by the middle of 2022 that should greatly reduce the need for restrictions on mobility or activity. For the latter trio, this offers hope of a very strong second half in 2022 and a restart of large-scale tourism,” Oxford Economics said.

“By the middle of next year, China, India, Indonesia, the Philippines and Vietnam should all have returned to the strong growth trends seen before the crisis. As a result, in 2022 and beyond, Asia-Pacific will resume its normal position as clearly the world’s fastest-growing region,” it added.