AMRO slashes Philippine GDP outlook as pandemic rages on

By Beatrice M. Laforga, Reporter

THE ASEAN+3 Macroeconomic Research Office (AMRO) expects the Philippine economy to expand at a slower pace this year than what was previously estimated due to the poor containment of the coronavirus pandemic.

This as the Health department reported 6,128 new coronavirus disease 2019 (COVID-19) infections, bringing the number of active cases to over 130,000.

In its ASEAN+3 Regional Economic Outlook 2021 released on Wednesday, the regional macroeconomic surveillance organization lowered this year’s gross domestic product (GDP) forecast for the Philippines to 6.9{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} from the 7.4{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} estimate it gave in January.

“We cannot expect the economy to strongly recover until the virus is under control. What’s going to be important now is targeted containment, containment that’s decisive, effective and proactive as far as possible, and the speedy rollout of vaccines that are accessible and acceptable,” Anne Oeking, economist at AMRO said in a press briefing on Wednesday.

AMRO maintained the Philippine GDP growth projection at 7.8{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} for 2022.

The latest estimates compare with the 6.5-7.5{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} target of the Philippine economic managers for 2021 and 8-10{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} forecast for next year.

Among Southeast Asian economies, AMRO’s GDP estimate for the Philippines is the second highest after Vietnam’s projected 7{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} expansion for the year. It is also higher than the estimated 4.9{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} regional average for the Association of Southeast Asian Nations (ASEAN), and 6.7{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} for ASEAN+3, which includes China, Japan and South Korea.

Ms. Oeking said the Philippines is projected to post one of the highest growth rates in the region due to low base effect, after the economy plunged by 9.5{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} last year.

“For this year, we actually expect that the growth rate will be one of the better ones in the region, [mainly] because 2020 was so weak, and that does not mean that output losses will be recovered this year,” she said.

The AMRO said the Philippines was among the economies most affected by the pandemic since household spending, one of its biggest growth drivers, was heavily disrupted by stringent lockdown measures.

It also pointed to the government’s “modest” spending, which only accounted for 23.5{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} of GDP in 2020, compared with the regional peers that rolled out fiscal stimulus of up to 53.9{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} of economic output.

“Stronger fiscal support should be used to shore up the economy if the recovery were to falter or weaken,” AMRO said.

AMRO said the Philippines will likely post the largest output gap in the region along with Myanmar by 2022.

Both economies are estimated to record 14{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} lower overall production next year, compared with the output they should have achieved had they grown at the same rate as before the crisis. This compares with Brunei, China and Singapore who have the narrowest output gap estimate of around 2{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} each.

AMRO said remittances from overseas workers remain a bright spot for the Philippines, as inflows remained resilient during last year’s crisis with only a 0.8{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} slump against the central bank’s projected 2{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} contraction.

Headline inflation is expected to average at 3.8{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} this year and at 3.3{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} next year, both within the 2-4{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} annual target of the Philippine central bank, AMRO said.

The general government budget deficit is seen rising to 9.1{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} by year’s end, before going back to 7.6{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} level next year.

Meanwhile, AMRO sees the country’s current account surplus to make up 0.9{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} of GDP in 2021 and 1.2{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} in 2022.

Other organizations also recently cut their GDP forecasts for the Philippines, including the World Bank who slashed its growth outlook to 5.5{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} for 2021 from 5.9{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} previously, and Economic and Social Commission for Asia and the Pacific (ESCAP), a United Nations body, which downgraded its estimate to 6.5{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} from 7{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4}.

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