Japan think tank retains Philippine forecast

MANILA, Philippines — The Japan Center for Economic Research (JCER) maintained its growth prospects for the Philippines this year as optimism for a better fourth quarter persists despite the slow pace of the vaccination program.

JCER kept its gross domestic product (GDP) growth forecast at 4.3 percent for 2021, the same figure it had in the June survey round.

The Tokyo-based think tank’s latest forecast now falls within the government’s revised GDP growth target of four to five percent for the whole year. The economy is coming off a 9.6 percent contraction in 2020.

“Some economists still forecast positive growth in the third and fourth quarter,” principal economist Masashi Uehara said in JCER’s latest survey.

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

Of the six economies, it was only in the Philippines that JCER retained its forecast amid downgrades for the rest of the countries.

Thailand had the sharpest downward revision at 1.4 percent to reach 0.5 percent. Indonesia came in second with a 0.6-point cut to 3.5 percent. Singapore’s GDP growth rate was also down 0.1 point to 6.8 percent, while Malaysia’s declined 0.3 point to 3.8 percent.

India, on the other hand, is expected to recover strongly this year to 9.4 percent from last year’s 7.3 percent contraction. Its forecast, however, was a 0.3-percent downgrade.

The unchanged growth outlook was given even though JCER emphasized that the Philippines recently saw its worst wave of infection due to the Delta variant.

“Per capita infection in the middle of September reached 190 per million, almost the same figure as that of Thailand. The vaccination rate is just above 20 percent, half of Thailand’s and the lowest among the six countries surveyed,” Uehara said.

JCER noted that the faster inoculation among the population will be key to a more solid economic rebound, boosted by higher exports and remittances.

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

“Among risks other than corona shock, repercussions of US monetary policy makes the top five in many countries. It ranks as the number two risk in the Philippines and India, number three in Indonesia, while also scoring fourth in Malaysia,” Uehara said.

Just last month, the US Federal Reserve announced that it may decide to taper quantitative easing in November, and Fed policy makers expect an interest hike by next year.

Such a move may lead to depreciation of Asian currencies against the US dollar.

Meanwhile, inflation concern is also hounding the Philippines and is expected to remain elevated for the remainder of the year.

JCER’s survey showed that headline inflation in the country will likely reach 4.1 percent, significantly higher than the ASEAN’s 1.2 to 2.3 percent range.

Its retained forecast for the Philippines is still above the Bangko Sentral ng Pilipinas’ target of 4.4 percent for 2021. Oil prices are still on an upward movement while commodity prices are reflecting the same pressures.