The country’s chief economist said he would stick with the official 4- to 5-percent economic growth target for this year, despite the bleak outlook painted by several institutions, provided more economic activities would restart and lockdown restrictions would be eased or dismantled. “I would be more optimistic than the IMF (International Monetary Fund), for instance. I continuously monitored the daily data … Although we have used the same term (ECQ or enhanced community quarantine) this year, you would find major differences now compared to last year (when ECQ was first put in place),” Socioeconomic Planning Secretary Karl Kendrick Chua told senators on Wednesday.
Chua, who heads the state planning agency National Economic and Development Authority (Neda), said he believed that given improved mobility these days, “the economy would not see the same thing that we saw last year; of course, we will have to continuously improve over time.” The Philippines posted its worst postwar recession in 2020 amid among the most stringent COVID-19 lockdowns in the region.
Citing Google mobility data, Chua said the number of workers who went to their place of work in August and September was only 20 percent lower compared to prepandemic levels. Last year, half of the workers did not go to their workplace, he said.
‘Shallower’ recovery
The Washington-based multilateral lender IMF earlier slashed its 2021 gross domestic product growth forecast for the Philippines to 3.2 percent from 5.4 percent previously, as it projected elevated inflation and the highest unemployment rate in Asia this year.
\In a press briefing Tuesday night, IMF chief economist Gita Gopinath noted that the Philippines “was hit hard by the second wave [of COVID-19 infections], but they had additional supplementary budgets rolled out that helped in terms of the recovery.”
IMF world economic studies division head Malhar Nabar said they expected “a shallower recovery in the second half of this year because of renewed concerns about caseloads and the spread of the pandemic.”
“The Philippines is coming out of a very steep contraction last year. The recovery is underway. We expect the economy to grow 3.2 percent this year, but we have downgraded the projection for this year because of developments in the second quarter when the pandemic took a turn for the worse and caseloads went up,” Nabar said.
He said the continued vaccine rollout and policy support should aid the continued recovery of the Philippine economy. “We project a growth rate of 6.3 percent in 2022, also supported by improvements in trading partner growth,” he added.
The IMF’s 2022 growth forecast for the Philippines was below the government’s 7-9 percent goal.
In the meantime, the Neda chief said reopening the economy would be the better solution to joblessness and helping businesses than merely giving away doleouts every time the country returned to stringent lockdowns.
“The idea of a recovery is to allow businesses to operate. But we have not really allowed many businesses to operate given our heightened quarantine … If we continue to have heightened quarantines, then there is a lot of hesitation and uncertainty,” Chua said.
“The more sustainable way to help businesses is to, first, open the economy—we have restricted them for more than 18 months already. Once we are able to reopen, then we will have [to deal with issues like] businesses needing financing or grants, which can be provided by the financial sector. But if we just provide funds [like] Bayanihan 2, but we restrict the economy from operating, then we are in this chicken-and-egg cycle where businesses don’t operate, [so] tax revenues fall, so we do not have additional revenues to provide more targeted support,” he added.
“We will provide the support, but the underlying necessary condition is the opening up; otherwise, we will just be putting or lending money to firms or people who cannot turn around that money and become productive,” according to Chua.