THE new lockdown imposed on Metro Manila and nearby provinces is threatening the economic recovery, according to First Metro Investment Corp. (FMIC) and University of Asia and the Pacific (UA&P).

“The uncertainties (as to duration and extent) arising from the new quarantine restrictions (Enhanced Community Quarantine, ECQ, as the most stringent) imposed by the government since Holy Week as COVID cases surged to new highs can sideswipe the still-fragile recovery,” FMIC and UA&P said in their April issue of The Market Call released Thursday.

The new lockdown will exert upward pressure on prices, especially with supply chains disrupted again. However, it said the decline in global oil prices will temper inflation.

Headline inflation eased to 4.5% in March from 4.7% in February, mainly because of the slower rise in food prices. The central bank expects inflation to average 4.2% this year, exceeding the official target range of 2-4%.

Stricter quarantine measures coupled with a slow vaccine rollout will likely keep the stock market volatile, they said.

“The PSEi (Philippine Stock Exchange index) seems to have steadied at a higher level than end-March and should recover more definitively after the economy posts more positive macroeconomic data and firms’ earnings improve in Q1-2021 relative to the previous quarter,” they said.

Despite the weakening economic outlook, the report noted signs of a rebound in imports and the continued expansion of factory output.

Goods imports rose 2.7% to $7.60 billion in February, rebounding from a 12% decline the month before.

Meanwhile, factory activity in March, as measured by the Philippine Manufacturing Purchasing Managers’ Index (PMI), remained above the 50-point mark, which separates growth from contraction. The PMI declined to 52.2 last month from 52.5 in February, but marked a third month of expansion.

Government spending, which rose 37.3% in February, could also drive growth. FMIC and UA&P are expecting the government to ramp up spending further for the rest of the year, especially for infrastructure.

The report added that spillover effects from the global economic recovery could ease the domestic slowdown, via Overseas Filipino Worker remittances and exports.

“Nonetheless, the long view seems to favor more positivity. Since prior to the pandemic, the economy has shown the ability to grow consistently above 6% per annum while the country can afford to stack up more debt as its debt-to-GDP ratio is at 41.5%. While the latter rose to 54.6% in 2020, the economic managers have shown some aversion to more huge borrowings as a way of getting back into the fast growth track,” it said. — Beatrice M. Laforga