Philippines cuts GDP growth outlook as virus surges

By Beatrice M. Laforga, Reporter

THE GOVERNMENT slashed its economic growth target to 4-5% for this year, reflecting the impact of stricter lockdown measures aimed at curbing a Delta-driven surge in coronavirus disease 2019 (COVID-19) infections.

The Development Budget Coordination Committee (DBCC) on Wednesday said it lowered the gross domestic product (GDP) growth target by two percentage points from the already downgraded 6-7% goal, as the mobility restrictions in Metro Manila and other parts of the country continue to crimp economic activity.

The DBCC in May trimmed the original 6.5-7.5% growth goal for this year to 6-7%.

“Without the present spike (in COVID-19 infections), the original growth target of 6-7% would have been achievable,” the DBCC said in a statement released after a special meeting.

“However, with the global emergence of the Delta variant, the second-half growth outlook was revised downwards to reflect the additional restrictions imposed by the government, which are necessary to curb its spread,” it added.

Metro Manila is under the strictest form of lockdown until Aug. 20, while other areas seeing a spike in COVID-19 cases have also been placed under tighter restrictions.

The Health department reported 11,085 new coronavirus infections on Wednesday, bringing the total number of active cases to 105,151.

Socioeconomic Planning Secretary Karl Kendrick T. Chua said the economy now has to grow by at least 4.3% in the second half to reach the low-end of the revised target for this year, and by 6.3% to achieve a 5% full-year growth.

The economy grew by 11.8% in the second quarter, after a 3.9% decline in the first three months of 2021. For the first half, GDP rose by 3.7%.

The DBCC kept its 7-9% growth target for 2022 on expectations of a faster vaccine rollout and further easing of quarantine measures. It also left its 6-7% projected expansion for 2023-2024 unchanged.

The interagency body, which consists of Budget department, the Finance department, the National Economic and Development Authority, the Bangko Sentral ng Pilipinas and the Office of the President, said the government’s strategy in containing the pandemic involves managing the risks by imposing localized quarantines for areas with high infections, while allowing the rest of the country to function.

“We will continue to use this period to accelerate the rollout of the vaccination program… Rest assured that we will continue to work closely with the local government units and the private sector to accelerate the country’s vaccination rates,” it said.

As of Aug. 15, a total of 12.6 million Filipinos have received two doses of the COVID-19 vaccines. Based on Aug. 16 data from Our World in Data, the Philippines has fully inoculated 11.63% of its population.

If the record high of 710,482 jabs administered in Aug. 5 will be sustained and the vaccines ordered will be delivered as scheduled, the DBCC said the government may be able to hit its target to inoculate majority of the population by year’s end.

“We expect that this will significantly reduce the need for wide-scale quarantines, especially in key economic centers where the majority of Filipinos work,” it said.

Mr. Chua said the DBCC retained the rest of the macroeconomic assumptions adopted in the previous meetings in July and May.

W-SHAPED RECOVERY
Meanwhile, the economy may only go back to its pre-crisis level towards the end of 2023 as the prolonged pandemic and subsequent lockdowns hamper growth, according to Ateneo Center for Economic Research and Development (ACERD).

During its midyear economic and political briefing on Wednesday morning, Ateneo de Manila University Economist and Professor Cielito F. Habito said they are now expecting a 3-4% modest growth for the economy this year.

The former socioeconomic planning secretary said the economy will likely experience a W-shaped recovery as he sees third-quarter GDP contracting on a quarterly basis.

In the second quarter, the economy grew by an annual 11.8% but declined by 1.3% quarter on quarter.

“Assuming that the (third-quarter) contraction would actually happen, we can expect to restore 2019 quarterly GDP levels either at the end of 2022 if we are looking at the optimistic scenario, end of 2023 if we’re looking at medium scenario, and much longer than that well into 2025 if we were in the pessimistic scenario,” Mr. Habito said.

He said the middle scenario is more likely to occur since the growth path follows the same trend the economy has seen since 2018.

In nominal terms, National Statistician Claire Dennis S. Mapa had said the country’s GDP at P8.9 trillion in the first half was still 6% smaller than its pre-pandemic level of P9.4 trillion in the first half of 2019.

“Remember that it took us six years to recover from the recession of the early 1980s, and that was just a recession due to the capital flight because of supply side recession. This is a recession on both the demand and supply sides,” Mr. Habito said.

The 10.7% decline in the third quarter of 1984 was the economy’s second-deepest contraction next to the record slump in the second quarter of 2020.

Meanwhile, Mr. Habito said the country’s unemployment rate will remain elevated to hover around 7-8% this year, far from its 5.1% level in 2019 but lower than the 10.3% last year.

Headline inflation will also remain high at 4-5% in 2021 due to both supply and demand side pressures, compared with the 2.6% logged in 2020 and the 2.5% rate before the pandemic hit.