Think tank hikes Philippines 2021 growth forecast

MANILA, Philippines — New York-based think tank Global Source Partners has raised its 2021 gross domestic product (GDP) growth forecast for the Philippines to 5.5 percent, faster than the four to five percent target set by government economic managers.

In a report, former Finance undersecretary and economist Romeo Bernardo said the Philippine economy grew surprisingly strong by 7.1 percent year-on-year and 3.8 percent on a sequential seasonally adjusted bases in the third quarter as the country continues to recover from the impact of the pandemic.

“The third quarter outperformance brought average GDP growth so far this year to 4.9 percent. With rapidly declining infection counts and more easing of mobility restrictions recently, we are expecting further improvements in activity in the fourth quarter and are therefore reverting to our original full-year forecast of 5.5 percent,” Bernardo said.

At the start of the year, Global Source said economic growth may reach 5.5 percent this year, but lowered its target to 3.5 percent in September due to repeated lockdowns and the emergence of the more contagious Delta variant.

Bernardo said the main driver in the third quarter was the seven percent quarter-on-quarter growth in household consumption, with a large part of spending growth due to increased purchases of discretionary goods and services.

“This is surprising considering the health situation and mobility restrictions in the third quarter, and it is unclear how much of this is due to pent-up spending unleashed by rising vaccination coverage,” Bernardo said.

He said other demand-side drivers include government consumption as well as public and private investments particularly in construction.

Bernardo said increased exports of goods and services were more than offset by much higher imports.

The think tank also expects a better Christmas for Filipinos as the government lowered the COVID-19 alert status for Metro Manila to Alert Level 2 from Alert Level 3 amid the continued decline in daily infections.

“To be sure, Christmas 2021 will be better than last Christmas; but on the whole, the parties and get-togethers that mark the season (pre-pandemic) will still be few and far between,” Bernardo said in a separate note.