AN ECONOMIC recovery for the Philippines could come “sooner than later,” though the main downside will come from the emergence of more infectious variants of the coronavirus, First Metro Investment Corp. (FMIC) and University of Asia and the Pacific (UA&P) said in a joint report Wednesday.

“The emergence of coronavirus disease 2019 (COVID-19) variants and possible draconian response still pose threats to a rapid economic reboot,” FMIC and UA&P said in their July market call.

The analysis noted that indicators in May including employment, manufacturing output, and government spending are helping to raise optimism that the economy is on the mend.

“The likelihood of continued improvement will largely depend on the roll-out of vaccines, the control of the spread of the COVID-19 and the relaxation of mobility restrictions. Employment gains should translate to higher aggregate spending, which will hopefully create more jobs in the second half,” according to the market call.

The May unemployment rate was 7.7%, equivalent to 3.73 million jobless, declining from 8.7% or 4.138 million in April, according to the Philippine Statistics Authority.

The June Labor Force Survey released Tuesday also came in at 7.7%, but estimated unemployment numbers at 3.764 million.

FMIC and UA&P are bullish that higher employment in sectors such as manufacturing and construction will help to propel a recovery in those sectors.

Factory activity continued to expand thought at a slower pace last month even as neighboring countries saw contractions due to the infection surge, according to IHS Markit. The Philippine Manufacturing Purchasing Managers’ Index was at 50.4 in July, slipping from a 50.8 reading in June, although still above the 50 neutral mark that separates contraction from expansion.

Another important factor that could help boost growth is the pickup in government spending, according to the market call.

“We expect National Government spending to accelerate further for the rest of the year as the May 2022 Presidential elections draw closer,” the two institutions said. 

Government spending in June rose 13.2% from a year earlier to P395.4 billion, according to the Bureau of the Treasury. Government spending in the first half of the year was P2.206 trillion, up 9.6% from a year earlier but still 9.56% short of the P2.44-trillion target for the January to June period.

In July, FMIC trimmed its GDP (gross domestic product) growth forecast for the year to 5-6% from the 5.5-6.5% estimate it issued in January. The official government target is 6-7%.

The economy contracted by 4.2% in the first quarter following the record 9.6% contraction in 2020. — Luz Wendy T. Noble