GROSS DOMESTIC PRODUCT (GDP) growth in 2021 is expected to hit 7.1%, though consumption could remain cautious with household incomes still under pressure from the economic downturn, according to ANZ Research.

ANZ Research Chief Economist Sanjay Mathur and foreign exchange analyst Dhiraj Nim said in a note, “Asia: Bracing for the reopening trade,” said spending on services such as travel, accommodation, recreation, and retail could help propel a recovery from 2020 lows as movement restrictions in Asia gradually ease.

“We can’t assume that (lower-income groups’) incomes and employment will recover to pre-pandemic levels immediately. However, the middle and upper-income groups, which have been relatively less affected by the pandemic, account for the lion’s share of spending on discretionary services,” ANZ said in a separate report.

Consumption accounts for 70% of the Philippine economy, supported largely by cash remittances, which fell 0.8% to $29.903 billion last year.

ANZ Research’s 2020 GDP forecast falls within the government’s 6.5% to 7.5% projection. In 2022, the bank expects the economy to grow by 6.2%.

ANZ Research also flagged inflation risk in Asia “at a time when markets are insufficiently prepared for it.”

Headline inflation in the Philippines hit 4.7% in February, the highest since 5.1% in December 2018, as oil and food prices continued to rise.

ANZ Research said inflation is expected to come in at about 3.8% and 1.8% in 2021 and 2022 respectively, both lower than the central bank’s 4% and 2.7% assumptions for those years.

ANZ Research said it is bullish about the prospects of a broader economic recovery in the region as vaccination drives gain momentum, which will help reopen trade. — Luz Wendy T. Noble

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