More think tanks downgrade Philippine growth forecast

MANILA, Philippines — International think tanks and credit raters are slashing the economic growth prospects for the Philippines this year amid surging COVID-19 cases and continued delay in vaccine rollout.

The latest downgrade came from the Japan Center for Economic Research (JCER), which cut its gross domestic product (GDP) forecast to 5.2 percent for 2021 from its earlier 5.9 percent projection, and Fitch Solutions Country Risk & Industry Research, which lowered its 2021 forecast to 5.8 percent from the original target of 7.6 percent.

The revised forecasts of the Tokyo-based think tank and the research unit of Fitch Ratings both fall way below the government’s target of 6.5 to 7.5 percent growth this year.

Last year, the Philippine economy shrank 9.5 percent, its worst in decades and sharpest among the largest economies in the region.

“Vaccination hopes boost expectations for pandemic relief, but economists are wary of rising infection rates and new variants. Virus containment is key to improving employment and consumption,” JCER principal economist Masashi Uehara said in the latest survey.

JCER’s quarterly survey collects insights from economists and analysts in the five biggest members in Southeast Asia (ASEAN 5) – Indonesia, Malaysia, the Philippines, Singapore and Thailand – and in India.

Of the six countries, the Philippines was the second with the largest GDP downgrade, after Thailand’s 0.9-percentage point cut to reach 2.6 percent. Malaysia came in third with 0.6-percentage point cut to 5.3 percent.

JCER emphasized that the Philippines’ road to economic recovery is dependent on how quick the government can lift restrictions and implement its mass vaccinations.

JCER noted that the spread of COVID-19 variants and delays in vaccination are concerns for economies but risks other than COVID-19 are also emerging.

“High inflation is the second-largest risk factor after coronavirus shock in the Philippines and India. Economists also forecast positive inflation rates in each country in 2021, higher than the previous survey in each country except Indonesia,” Uehara said.

Meanwhile, Fitch Solutions said the new surge in cases and the tightening of mobility restrictions are set to hamper the country’s recovery from the pandemic-induced recession.

“The surge in COVID-19 cases in the Philippines in March and lockdown measures imposed, reflect the continued risks to the archipelago’s economic outlook. We at Fitch Solutions expect increased restrictions on activity to curb the rising cases and this to depress domestic activity in the near term,” it said.

“We expect the lockdown measures to be extended given the continued surge in cases and the prolonged impact on hospital capacity. The likelihood of further outbreaks in other regions remains high and given the slow vaccination rollout in the country, we believe the Philippines’ recovery will continue to be hampered by the pandemic,” it said.

Fitch Solutions said its earlier projection that the Philippines’ real GDP would return to pre-pandemic levels by 2022 may further be delayed amid the slow vaccine rollout and recurrent difficulties in containing outbreaks.

As such, Fitch Solutions lowered its private consumption growth to 4.5 percent from the original target of 5.5 percent and its gross fixed capital formation to 14 percent instead of 20 percent for this year.

It said that growth support would stem from the gradual recovery in remittances from overseas Filipino workers (OFWs) on the back of a recovery in the US and the Middle East.