‘Philippines economy in a worrisome state’

MANILA, Philippines — The  recovery of the Philippine economy  may  further stall amid the recent spike in  COVID-19 infections, according to Moody’s Analytics and BDO Unibank Inc.

Katrina Ell, economist at Moody’s Analytics, said the Philippine economy is in a worrisome condition and is likely to further stall at least through the first half of this year amid the recent resurgence of COVID-19 cases, limited vaccine availability, large output gap and elevated inflation.

“The recent spike in local infections means that the economic recovery could easily be further stalled at least through the first half of 2021,” Ell said.

Ell said the Philippines has so far only received enough vaccines for one percent of the population, with current estimates indicating that the population would not be fully vaccinated until 2023.

“Vaccine availability has been limited, putting the Philippines at continued risk of further outbreaks in the near term,” Ell warned.

According to Moody’s Analytics, the Philippines is seen rebounding from a record 9.5 percent gross domestic product (GDP) contraction last year with a growth of 6.3 percent  this year.

“Our forecast for GDP to grow by 6.3 percent in 2021 has significant downside risks at this stage. We will review this figure in our early-April forecast round,” Ell said.

The research arm of the Moody’s Group said the elevated inflation may prompt the Bangko Sentral ng Pilipinas (BSP) to keep an accommodative stance and maintain a low interest rate regime for the rest of the year.

“We expect the central bank will keep current monetary settings on hold in 2021 and that further policy support will come from more targeted fiscal measures as the economy weathers a slower-than-expected recovery this year,” Ell said.

Meanwhile, BDO chief investment officer Fritz Ocampo said   the country’s GDP would still contact by 4.3 percent in the first quarter.

The bank is expecting a strong bounceback with a double-digit GDP growth of 14.5 percent in the second quarter before stabilizing to 7.2 percent in the third and fourth quarters.

“We believe that the first quarter will continue to see a contraction of 4.3 percent and that should be the end of the negative GDP results. As we enter the second quarter onwards we are headed for a strong bounce back,” Ocampo said.

“While we’re expecting a bounce this year, full recovery for the 2019 economy will still be in 2022,” Ocampo said.

BDO expects the economy to grow by six percent this year.