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Philippines abandons double-digit growth goal in Duterte's final year
Gross domestic product shrank 4.2% year-on-year from January to March, worse than the 0.7% contraction a year ago when the pandemic has just started, government statisticians reported on Tuesday.
Miguel De Guzman, file

Philippines abandons double-digit growth goal in Duterte's final year

Ian Nicolas Cigaral (Philstar.com) - May 18, 2021 - 7:23pm

MANILA, Philippines — The emergence of more infectious coronavirus variants and a brief return to tighter mobility restrictions put a damper on the Duterte administration’s optimistic economic outlook that originally included a double-digit growth target next year.

The last full-year growth under President Duterte is targeted to settle at 6-7% in 2021, slightly slower than the 6.5-7.5% seen last December. By next year, the middle of which would see a new government take office, the growth target is set at 7-9%, also down from an ambitious 8-10%.

Last year, the economy shrank a record 9.6% year-on-year. 

Downgrades to the targets were expected after a disappointing 4.2% contraction in the first quarter that was worse than anticipated by observers. Even with marginally pessimistic assumptions, hitting the new goals appears easier said than done, as in the remaining three quarters of 2021 alone, the Philippines would have to grow an average of 10%, Socioeconomic Planning Secretary Karl Kendrick Chua said.

The economy would need to muster that growth while possibly see-sawing over lockdowns throughout the year if and when infections spike. The scale of prohibitions is not expected to exceed that of 2020, Chua said, hence they should allow for some activity to continue, although some losses could still be incurred.

That said, the Cabinet-level Development Budget Coordination Committee, which sets the targets, is counting on vaccinations to prevent a repeat of last March’s new lockdowns in Metro Manila and four nearby areas that crippled over half of gross domestic product (GDP) produced in those areas. Restrictions had since been eased until May 31, allowing more businesses to reopen.

On top of that, Chua said contact tracing, which government admitted had been the weakest link on its pandemic response, has gone “digital” over a year into the health crisis. It is unclear what this meant, but in many establishments, the use numerous tracer apps have hampered the process of touching base with potential infections. 

Inoculations in recent weeks got a significant boost from the arrival of a new batch of vaccines produced by AstraZeneca LNC in the UK, as well as first set of jabs from Pfizer. Over 3 million doses had been administered, but against the government target to inoculate 70 million people for herd immunity, that corresponds to only about 2% of that population receiving at least a dose of any vaccine.

Meanwhile, apart from GDP, economic managers revised as well the rest of their macroeconomic assumptions and spending plans. Changes are reflected on tables below:

2021 macroeconomic assumptions

Indicator December DBCC meeting May DBCC meeting
GDP growth/ (contraction) (%) 6.5-7.5 6-7
Inflation (%) 2-4 2-4
Dubai crude ($/barrel) 35-50 50-70
Peso-dollar exchange rate 48-53 48-53
Goods export growth (%) 5 8
Goods import growth (%) 8 12

2022 and 2023 assumptions

Indicator 2022 2023
GDP growth (%) 7-9 6-7
Inflation (%) 2-4 2-4
Dubai crude ($/barrel) 50-70 50-70
Peso-dollar exchange rate 48-53 48-53
Goods export growth (%) 6 6
Goods import growth (%) 10 8

Budget program

Indicator 2021 2022 2023 2024
Revenues (in trillion pesos) 2.88 3.29 3.59 4
Expenditures (in trillion pesos) 4.74 4.95 5.11 5.40
Surplus/ (Deficit) (% of GDP) (9.4) (7.7) (6.4) (5.4)

DBCC NOVEL CORONAVIRUS PHILIPPINE ECONOMY
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