Japan think tank sees sluggish PH recovery in 2021

Think tank Japan Center for Economic Research (JCER) sees the Philippine economy growing minimally quarter-on-quarter in each of the four quarters of 2021 before returning to prepandemic levels by mid-2022.

“We forecast that the Philippines’ recovery will be slow in 2021 because it takes time to control the spread of COVID-19 infections. The schedule of vaccination is uncertain, too,” JCER senior economist Akira Tanaka told the Inquirer.

JCER’s latest forecasts showed a more optimistic full-year 2021 gross domestic product (GDP) growth projection of 6.6 percent, compared to its 5.9 percent forecast in December last year.

While JCER’s updated forecast is within the government’s target range of 6.5-7.5 percent GDP expansion, Tanaka said “consumption and capital formation are expected to remain weak in 2021.”

The sluggish recovery this year would reflect on the quarter-on-quarter GDP growth rates—JCER projected only 0.8 percent in the first quarter from the level in the fourth quarter of 2020.

The slowing quarter-on-quarter growth, or from 8 percent in the third quarter and 5.6 percent in the fourth quarter of 2020, reflected the drag in reopening the economy as COVID-19 infections remained high. This month, cases surged such that localized lockdown and curfews were imposed to contain the spread of the disease.

Target within gov’t range

JCER projected quarter-on-quarter GDP growth rates inching up 1.3 percent in the second quarter, 1 percent in the third quarter and 1.1 percent in the fourth quarter of this year.

On a year-on-year basis, JCER projected GDP to shrink by 2.2 percent in the first quarter, bigger than the 0.7-percent decline a year ago. It will prolong the pandemic-induced recession to five straight quarters.

Given the low base at the height of the stringent COVID-19 lockdown last year, JCER expects GDP to climb by 16.4 percent year-on-year during the second quarter, 8.9 percent in the third quarter and 4.3 percent in the fourth quarter.

“We foresee the Philippines’ economy will return to prepandemic GDP level in the second half of 2022,” Tanaka said.

JCER projected the Philippine economy to grow by 6.4 percent in 2022, slower than the government’s goal of 8-10 percent, but the fastest across the Association of Southeast Asian Nations (Asean)-4, which included Indonesia, Malaysia and Thailand.

The delay in obtaining vaccines and “greatly uncertain” vaccination rollout will be negative for economic recovery in Asean-4, JCER said.

Malaysia will lead GDP growth in Asean-4 in 2021 as JCER projected 6.8-percent expansion. Indonesia’s GDP would grow by 5.1 percent while Thailand’s would expand by 3.9 percent this year, JCER’s projections showed.

JCER expects average GDP growth in Asean-4 at 5.3 percent in 2021, and then rising to 5.8 percent in 2022.

Asean-4 economies contracted by an average of 4.7 percent last year, with the Philippines’ worst post-war recession shrinking GDP by 9.5 percent. In 2020, Thailand’s GDP shrank by 6.1 percent; Malaysia’s, 5.6 percent; and Indonesia’s 2.1 percent.