MANILA, Philippines—Economic think tanks and financial institutions have raised their 2021 gross domestic product (GDP) growth forecasts for the Philippines following the stronger-than-expected 7.1-percent expansion in the third quarter, despite lingering “scarring” threats from the prolonged COVID-19 pandemic.
Goldman Sachs Economics Research raised its full-year projection to 4.9 percent, within the government’s 4-5 percent growth target, from 3 percent previously.
Investment banking giant Goldman Sachs echoed Socioeconomic Planning Secretary Karl Kendrick Chua’s optimism on hitting this year’s growth goal “as COVID-19 cases decline, vaccinations pick up and the economy gradually reopens.”
Pantheon Macroeconomics also raised its forecast to an above-target 5.5-percent growth this year from 4 percent previously. But the UK-based think tank’s senior Asia economist Miguel Chanco said the strong third-quarter outturn was “far from sustainable.”
“The bad news is that the sturdy bounce-back in private consumption in the third quarter likely will come at the expense of the speed of the longer-term recovery,” said Chanco.
“We continue to believe that the rebuilding of rainy-day funds, back to the pre-COVID-19 situation wherein 37 percent of households had savings, will continue to weigh on spending decisions in the coming year,” he said.
Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort said full-year GDP growth would be about 5 percent or higher with selected lockdowns in place unlike in the past when blanket restrictions choked economic activity.
Capital Economics Asia economist Alex Holmes said the London-based think tank also had a rosier 2021 growth forecast of 5.2 percent from 4.5 percent previously.
“The good news is that the economy is set for another strong [fourth] quarter,” Holmes said, citing mobility tracker that is currently at its highest level since the onset of the pandemic.
But Holmes said “the bad news is that the economy is still weak and starting from a very low base — GDP was around 6-percent below its pre-crisis level and 15-percent behind its pre-crisis trend in the third quarter.”
DBS Group Research economist Chua Han Teng said the Singapore-based bank’s upgraded GDP forecast of 5 percent for this year from 4.2 percent previously meant that “the Philippine economy is recovering gradually after enduring a bumpy 2021 and 2020, and will make further progress in 2022.”
“However, having endured the greatest economic hit from the pandemic in Asean, scarring is likely to be considerable and could hinder the recovery’s momentum and medium-term growth potential,” said DBS’ Chua.
“Based on our projected growth trajectory, real GDP would return to 2019 levels in the second half of 2022. We therefore expect economic policies to remain supportive for some time and be unwound gradually,” Chua said.
Oxford Economics assistant economist Makoto Tsuchiya said the UK-based think tank would likely also raise its currently less optimistic 3.4-percent growth projection for 2021.
“Nonetheless, GDP is still 5.9-percent below pre-COVID-19 level and we expect the BSP [Bangko Sentral ng Pilipinas] to stay on hold next year to support the recovery, despite inflation remaining elevated in the short term,” Tsuchiya said.
“We expect the recovery to continue in the fourth quarter and become more broad-based in 2022 as easing restrictions will boost confidence and activity,” Tsuchiya added.
“Meanwhile, despite headwinds from slower China growth, we expect robust foreign demand to support exports growth. That said, low vaccination rate as well as prolonged global supply disruptions are downside risks to our outlook,” Tsuchiya said.
Moody’s Analytics associate economist Sonia Zhu and economist Denise Cheok said they will also “consider a small upwards revision to our 4-percent GDP growth forecast for 2021.”
Moody’s Analytics said “a higher vaccination rate is the key to a quicker economic recovery.”
“Some 30 percent of the total population is vaccinated, putting the Philippines among the region’s laggards but on track to reach herd resiliency by mid-2022,” the think tank said.