THE economy is expected to grow 7.2% in 2021 as the Philippines appears to be avoiding a resurgence of coronavirus disease 2019 (COVID-19), which is dampening the economies of other countries, according to Mitsubishi UFJ Financial Group (MUFG).

MUFG’s 2021 outlook is within the government’s growth projection of 6.5% to 7.5% next year. MUFG expects the economy to contract by 6.3% this year, also within the official range of between minus 4.5 and minus 7.5%.

The Philippines is doing “relatively okay” unlike some economies in Europe which are struggling with a coronavirus resurgence, MUFG Global Research ASEAN Head of Global Markets Leong Sook Mei said.

“But when you start reopening, you have a risk again of more cases,” Ms. Leong said in an online briefing Thursday.

COVID-19 cases in the Philippines have topped 320,000.

“Second and third waves seemed to be handled a bit better….Different governments are getting a better hold of handling the COVID situation,” Ms. Leong said.

For the third and fourth quarter, the Japanese lender expects continued GDP (gross domestic product) contraction but likely less than minus 6% on average, MUFG Global Research analyst Sophia Ng said.

Ms. Ng said prospects for remittance and the business process outsourcing are still tilted to the downside despite some improvement.

Ms. Ng said the Bangko Sentral ng Pilipinas has “limited scope” for further easing, but any such moves may come in early 2021.

The central bank has slashed rates by a total of 175 basis points (bps) this year, reducing the overnight reverse repurchase, lending, and deposit rates to record lows of 2.25%, 2.75% and 1.75%, respectively. It has also reduced the reserve requirement for big banks by 200 bps and for thrift and rural lenders by 100 bps.

Separately, Rizal Commercial Banking Corp. (RCBC) expects the economy to contract by between 7.5% and 9.5% this year before returning to growth of 7% to 8% in 2021.

“At least P2 trillion in total economic losses could completely erase the usual Philippine GDP growth of at least 6% under normal conditions (before COVID-19) for most of the recent years,” RCBC Chief Economist Michael L. Ricafort said. — Luz Wendy T. Noble

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