Oxford Economics among least bullish on Philippine economic growth

MANILA, Philippines — London-based Oxford Economics further slashed its growth forecast for the Philippines to 4.5 percent this year, among the lowest projections for the country, due to a weaker-than-expected performance in the first quarter and slim prospects of recovery in the second quarter.

This is the third time the think tank downgraded its gross domestic product (GDP) projection, which now falls way below the government’s target of six to seven percent for the year.

In an email to The STAR, Oxford assistant economist Makoto Tsuchiya said the downgrade is a reflection of the disappointing first quarter output as well as expectations of a mild recovery in the second semester.

GDP contracted by 4.2 percent in the first quarter and extended the recession from last year.

“We expect GDP to contract sequentially in the second quarter as restrictions weigh on domestic demand,” Tsuchiya said.

Oxford forecasts GDP to contract by 0.5 percent on a quarterly basis but would post a 12 percent growth annually owing to the low base effects from last year.

Recovery, however, will slowly pick up pace in the remaining half of 2021 as more vaccinations allow restrictions to ease and exports benefit from the global recovery.

“But, we expect the road to recovery will be bumpy, as slow vaccine rollout and still elevated COVID-19  infections mean sporadic tightening and extension of restrictions are likely,” Tsuchiya said.

With the latest forecast, among the emerging markets (EMs), the Philippines will now lag behind in terms of economic growth as compared with India’s 9.1 percent and China’s 8.9 percent. EMs, on average, are expected to post a seven percent growth.

In the ASEAN region, the country’s GDP is also seen to be lower than that of Malaysia’s 5.3 percent and Indonesia’s 4.7 percent but higher than Thailand’s 2.8 percent.

“While the broad outlook is bright for the second half, the slow pace of the vaccination programs will impinge on the expected rebound in some countries, including India and ASEAN,” Oxford Economics said in its latest monthly global outlook.

By 2022, the Philippine economy is seen growing by 8.6 percent. However, it will slow down to 7.8 percent and 6.9 percent by 2023 and 2024, respectively.

Although the global growth backdrop remains positive for EMs, Oxford said supply shortages and shipping delays may dampen industrial momentum in the coming months, and producer prices could face further upward pressure.