THE ECONOMY could exceed the government’s downgraded growth target for this year, with a quicker vaccination rollout and improved weather in the remaining months.

In a joint report released on Monday, First Metro Investment Corp. (FMIC) and University of Asia and the Pacific (UA&P) noted that economic data were muted in August as stricter lockdowns dampened business activity.

This had prompted the government to lower its gross domestic product (GDP) growth projections for this year to 4-5% from 6-7%. Economists from FMIC and UA&P in July said they expected GDP to grow by 5-6% this year.

“The rosy outlook supported by economic data in the past months now has paled a bit,” FMIC and UA&P said in its September Market Call report.

“We remain confident that the economy will overcome the current obstacles — especially with faster vaccination rollouts and better weather conditions.”

The Philippines aims to inoculate 50-60% of its population by yearend. As of Sept. 30, the Philippines had fully vaccinated 21.83% of its population, according to Our World in Data.

The government plans to start vaccinating the general population and minors this month, although it will continue to prioritize health workers, senior citizens, seriously ill people, essential workers and the poor.

Inflation reached 4.9% year on year in August due to higher food prices as typhoons and heavy rains disrupted supply chains, FMIC and UA&P said.

Better weather could also back stable food supply chains, they added.

“Local inflation may stay close to 5% until September, given elevated crude oil prices and some supply chain issues related to food items and low base until October. However, we still expect a deceleration starting in the latter months and going below 4% by December at the latest,” according to the report.

Exports could grow for the rest of the year, although a double-digit pace is unlikely.

The trade-in-goods deficit widened in July to $3.29 billion from $2.13 billion in the same month last year, data from the Philippine Statistics Authority showed. The country’s merchandise imports rose by 24% to $9.71 billion while exports went up by 12.7% year on year to $6.42 billion.

Government spending could also “go full throttle” as the economy needs stimulus from infrastructure spending.

“We expect spending to significantly pick up pace in the coming months with the Presidential elections in May 2022 only some months away,” according to the report.

The government kept its 7-9% growth target for 2022 as it expects a faster vaccine rollout and further easing of quarantine measures. — J.P.Ibañez