Finance chief optimistic PH will be back to normal by Q1 2022

President Duterte’s chief economic manager on Tuesday said he expected that a successful mass vaccination of all Filipino adults by year-end would allow the country to be back to normal early next year, even as a UK-based think tank cut its growth projection for the Philippines and expected the reimposed lockdowns to hurt second-quarter prospects.

Asked during an interview with CNBC on Tuesday if the Philippines could see a return to normalcy in terms of prepandemic levels of economic activity by the first quarter of 2022, Finance Secretary Carlos Dominguez III replied: “Certainly.”

Safe reopening of economy

Dominguez’s optimism stemmed mainly from the government’s plan to inoculate 70 million Filipinos or the entire adult population this year, which would allow a safe reopening of the economy.

The Finance chief said to date, the Philippines had 3.5 million doses of COVID-19 vaccines on hand, with 1.8 million people who already received the first of two shots.

Dominguez said the Philippines had contracted 143 million vaccine doses, of which 15-20 percent would be delivered during the first half of the year and the rest by the second semester.

Cut in growth forecast

Despite global supply challenges, Dominguez said they expected manufacturers to deliver as they had committed the vaccines, which would in turn prevent severe COVID-19 infections regardless of source amid concerns on low efficacy of the jabs donated by China.

While Philippine officials were optimistic, Oxford Economics slashed its 2021 gross domestic product (GDP) growth forecast for the Philippines to 6.2 percent from about 7 percent previously.

Oxford Economics’ updated projection was below the government’s 6.5 to 7.5 percent GDP growth target range for 2021.

In a webinar on Tuesday, Oxford Economics lead Asia economist Sian Fenner said the renewed more stringent COVID-19 quarantine restrictions in some parts of the Philippines would have a bigger impact on second-quarter growth.

So-called National Capital Region Plus, which had been placed on the strictest enhanced community quarantine (ECQ) for two weeks and then the ongoing modified enhanced community quarantine (MECQ) up to the end of this month, accounted for half of the Philippines’ GDP.

While the Philippine economy was expected to grow faster—and likely the fastest in the region on a quarterly basis—by the second half, Oxford Economics expects it will remain having the biggest gap in the region compared to pre-pandemic levels—the end-2020 output was estimated to be over 8-percent smaller than 2019 GDP.

Oxford Economics estimates showed that faster mass vaccination could grow GDP by more than 8 percent this year, while a slow rollout may further slow growth to as low as over 4 percent.

While both Dominguez and Fenner separately noted that the recent lockdowns imposed in the Philippines and across the Asean region had been more localized, the latter pointed out that these virus curbs would have a larger impact on household spending than on the manufacturing and export sectors.

Fenner said that across Asean, base effects from last year’s recession, recovering global trade, expected faster economic growth in China and the US, as well as robust public spending, especially on infrastructure, would be favorable to the growth outlook.

In a separate note to clients, also UK-based Pantheon Macroeconomics said it expects the Philippines “probably will extend the second-strictest level of anti-COVID-19 curbs in Manila and surrounding areas to the end of May.”

“The case-count has peaked, but it’s still stubbornly high. And we aren’t reading too much into the drop since mid-April, as this was due almost entirely to a decline in testing. Tellingly, the positivity rate hasn’t budged,” Pantheon Macroeconomics senior Asia economist Miguel Chanco said.