THE PHILIPPINE economy is expected to grow by 4.9% this year, as the coronavirus disease 2019 (COVID-19) remains a major risk to recovery, according to Mitsubishi UFJ Financial Group (MUFG).
MUFG’s latest estimate is lower than its previous 5.3% growth expectation but is within the 4-5% full-year target set by the government.
“I think it’s mainly due to the disruptions in economic activity that we have seen in the past few months due to the second and consequent third COVID-19 waves in the Philippines,” MUFG analyst Sophia Ng said at an online briefing on Wednesday.
Ms. Ng said COVID-19 is still a major risk, citing Singapore where cases surged despite full vaccination rate.
Singapore has fully vaccinated 82.07% of its population, compared with the Philippines where only 22.48% of people have completed their vaccine doses, based on data from the Johns Hopkins University.
“Another risk that we see here to economic growth is that mobility restrictions will not be able to be loosened significantly in the Philippines,” she said.
Mobility curbs have been gradually relaxed in Metro Manila as the number of COVID-19 cases has fallen from a peak in August. The Health department reported 3,656 COVID-19 cases on Wednesday, bringing active cases to 67,061.
MUFG expects the Philippines to grow by 6.8% in 2022, below the government’s 7-9% goal.
Ms. Ng said it would take the country beyond 2022 to recover its pre-pandemic gross domestic product (GDP).
“My estimate at the moment is about two to three years — it will take a longer time for the Philippines to actually return back to pre-pandemic levels,” she said.
Aside from the virus, Ms. Ng said the May national elections could create more uncertainty for the country’s growth in the first half of 2022 and the peso.
Meanwhile, Ms. Ng expects the Bangko Sentral ng Pilipinas (BSP) to keep interest rates at record lows “for at least the next six months.”
The central bank kept the policy rates steady at its September meeting.
“Even with inflationary pressures booting up in the coming months, we think BSP is unlikely to tighten monetary policy prematurely. Doing so will derail the pace of economic activity and will be ineffective in containing inflationary pressures that are mostly driven by supply-side constraints rather than strong demand,” Ms. Ng said.
In September, inflation eased to 4.8% from 4.9% in August. However, it was still higher than the central bank’s 2-4% target.
Lin Li, Asia head of Global Markets Research at MUFG, said elevated inflation experienced by many economies appeared to be transitory.
“The high inflation is still defined as transitory but again, it’s very hard to define really how long it is going to be transitory. Our cue is that inflation will stay elevated, for some countries it could be higher,” Ms. Li said.
“The high inflation could well be extended until early next year. We are expecting it to moderate by the second quarter of next year,” she added. — Luz Wendy T. Noble