Rising COVID-19 cases pose recovery hurdle — DBS

MANILA, Philippines — The recent uptick in COVID-19 cases is posing a single biggest challenge to ongoing economic recovery in the Philippine economy, according to DBS Bank Ltd. of Singapore.

In a report, DBS economist Radhika Rao said the impact of rising cases among the Association of Southeast Asian Nations (ASEAN) is most telling on mobility trends as governments reimposed restrictions.

“Consensus is catching down with our 2021 growth forecasts for Malaysia, Thailand, and the Philippines,” Rao said.

DBS expects a seven percent growth for the Philippine economy this year and six percent next year after shrinking by a record 9.6 percent in 2020.

The strict lockdown was reimposed as the National Capital Region and adjacent provinces (NCR Plus) were placed under enhanced community quarantine from March 29 to April 11 and under modified enhanced community quarantine from April 12 to May 14.

Rao said the scarring in the labor market, as well as the income inequalities, are fallouts from the COVID-19 pandemic that may take longer to heal.

“Domestic demand is on the mend, with the labor market scarring to last longer. Exports are comparatively faring better, upheld by the commodity upcycle, selected sectoral outperformance and resilient global or China growth,” Rao said.

COVID-19 infections in the Philippines breached the one million mark last week with over 17,000 deaths despite imposing the longest and strictest lockdown in the world.

“Notably, after the curve had flattened earlier in the year, the daily count is rising again in a few countries, especially Thailand, the Philippines and Malaysia,” she said.

Rao lamented the modest vaccine progress in the region. “Vaccinations have begun across the region, but there is much catch-up to do,” she said.

Furthermore, the Singaporean bank expects the Bangko Sentral ng Pilipinas (BSP) to keep an accommodative policy stance to enable the Philippine economy to recover faster from the pandemic-induced recession.

“Policy rates have been lowered to record low in the region. We expect a dovish hold in the region for 2021 notwithstanding pockets of inflationary pressures, but readings are within policy targets,” Rao said.