Philippines seen growing only 4.7% this year

MANILA, Philippines — Barcelona-based FocusEconomics expects a slower recovery for the Philippines in the next two years despite exiting the pandemic-induced recession in the second quarter.

The think tank slashed anew its 2021 economic growth forecast for the Philippines to 4.7 percent from the original target of 5.2 percent and to seven instead of 7.1 percent for 2022 due to the slow COVID vaccination as well as uncertainties in the run-up to next year’s general elections.

FocusEconomics said higher exports and remittances, however, continue to help the Philippines move closer to pre-pandemic levels this year.

“Nonetheless, the weak vaccination campaign and the reintroduction of restrictions mean the recovery will be more tepid than anticipated. Ongoing slow vaccination progress is the key risk, while uncertainty in the run-up to next year’s elections further clouds the outlook,” FocusEconomics said.

The Philippines slipped into recession as the gross domestic product (GDP) contracted by a record 9.6 percent last year, ending 21 years of positive growth, due to the impact of the pandemic.

The country emerged from recession with a GDP growth of 11.8 percent in the second quarter from a 3.9 percent contraction in the first quarter.

“The economy recorded a sky-high year-on-year growth rate in the second quarter thanks to soaring private consumption, fixed investment and exports, although public spending dropped as the government adopted a tighter fiscal stance,” it said.

However, the think tank pointed out that the economy that came from a low base actually contracted in seasonally adjusted quarter-on-quarter terms.

“Closer examination showed that services output was the main reason for the decline, which points to the likely driver: soaring COVID cases and the strengthening of restrictions,” it said.

The GDP latest projection of FocusEconomics is still within the revised four to five percent target set by the Development Budget Coordination Committee (DBCC).

“Moving into the third quarter, restrictions were further tightened in August. Moreover, logistical challenges and public resistance to vaccines—especially Chinese shots—threaten to derail the vaccination program, boding ill for growth prospects ahead,” FocusEconomics said.