Slower recovery seen for PHL this year
THE Philippines will likely see a slower pace of recovery this year, as the International Monetary Fund (IMF) and a United Nations (UN) think tank trimmed their growth forecasts amid uncertainty over the vaccine rollout and continued restriction measures.
The IMF cut its gross domestic product (GDP) forecast for the Philippines to 6.6% this year, from the initial forecast of 7.4% given in October. The economy is expected to grow by 6.5% in 2022.
“The projected rebound in 2021 and 2022 is primarily driven by a renewed infrastructure investment push and a gradual recovery of the private sector, supported by accommodative monetary policy and global recovery,” IMF Representative to the Philippines Yongzheng Yang said in an e-mail to BusinessWorld.
The IMF’s 2021 GDP estimate is well-within the government’s 6.5-7.5% target growth while the 2022 projection is less optimistic than the 8-10% estimate given by economic managers.
Mr. Yang identified several downside risks to the growth outlook, including the ongoing lockdown restrictions and uncertainty over the government’s COVID-19 vaccination program.
“We expect that social distancing and some forms of restrictions will persist this year,” he said, despite noting the country has already seen a “steady flattening of the infection curve” since September last year.
The Health department reported 1,173 new COVID-19 infections on Tuesday, bringing the total to 516,166, with active cases at 30,357.
“Like in most other countries, vaccination is a gradual process and progress is subject to uncertainty,” he said.
The government is aiming to start immunization next month, with the goal to inoculate 70 million people within the year.
This year, IMF’s Mr. Yang said headline inflation in the Philippines may average 3.1%, which is slower than the 3.2% forecast by the Bangko Sentral ng Pilipinas, but quicker than the 2.6% in 2020. Its forecast of 3% inflation in 2022 is faster than the central bank’s 2.9% projection.
The IMF said ASEAN-5 economies — comprising Indonesia, Malaysia, the Philippines, Thailand, and Vietnam — are projected to grow by 5.2% this year, slower than the previous forecast of 6.2%. On the other hand, the 2022 estimate was upwardly revised to 6% from 5.7%.
“The strength of the recovery is projected to vary significantly across countries, depending on access to medical interventions, effectiveness of policy support, exposure to cross-country spillovers, and structural characteristics entering the crisis,” the IMF said.
At the same time, the UN Department of Economic and Social Affairs (DESA) said it expects the Philippines to grow by 6.2% this year, lower than its earlier 6.3% forecast.
This after the Philippines likely saw the worst contraction in Southeast Asia in 2020 due to the pandemic.
In its World Economic Situation Prospects 2021 report released on Tuesday, UN DESA said the Philippine GDP likely shrank by 8.8% last year, a reversal from the 6.2% growth forecast it gave in January 2020.
Official GDP data will be released on Thursday. A BusinessWorld poll showed a median 9.5% contraction for the entire 2020.
“While Singapore, Thailand, and Vietnam flattened the curve relatively quickly and with shorter lockdowns, Indonesia, Myanmar and the Philippines are still struggling with high daily levels of new infections. In the latter group, a more prolonged period of limited mobility and weak sentiments will depress consumer spending and private investment, thus constraining the pace of recovery,” it said.
This year, all Southeast Asian economies are expected to post growth, led by Vietnam (7.8%), followed by Malaysia (6.6%), Myanmar (6.5%) and the Philippines.
The UN DESA said the Philippines’ likely 8.8% GDP contraction was the worst economic performance among 11 economies in Southeast Asia in 2020.
The Philippines lagged behind Thailand (-6.6%), Singapore and Timor Leste (-6.5%), Malaysia (-4.8%), Indonesia (-1.6%), and Cambodia (-1.4%). Four countries likely expanded last year, namely Vietnam (3.4%), Myanmar (2.3%), Brunei (1.2%), and Laos (0.5%).
The UN DESA expects headline inflation to ease to an average of 2.1% this year from 2.6% in 2020, and pick up by 2.8% in 2022.
In its World Economic Outlook Update released on Tuesday, the IMF said global economic activity will remain below the pre-pandemic levels this year, even as recovery gets under way.
For this year, the IMF said the global economy will grow by 5.5%, faster than the 5.2% earlier estimate. The growth forecast for 2022 is kept at 4.2%.
“Much remains to be done on the health and economic policy fronts to limit persistent damage from the severe contraction of 2020 and ensure sustained recovery,” it said. — with Beatrice M. Laforga