PROGRESS in the country’s vaccination program could help spur economic activity and boost recovery prospects, which would lead to the normalization of monetary policy, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Tuesday.

“Considering recent economic developments and significant progress in vaccine rollout, we are optimistic that there is sufficient support for the country’s recovery this year,” Mr. Diokno said in a Tuesday Club virtual press event on Wednesday.

“The management of risks, the expected revitalization of key industries from government policy support and structural reforms, as well as the resumption of global economic activities, should help the Philippine economy move toward a steady recovery path,” he added.

Mr. Diokno said the central bank will start unwinding its pandemic-driven easy policy once the economy’s rebound firms up.

“Once full recovery of the economy is underway, the BSP will implement a pre-planned exit strategy,” he said.

The BSP has not adjusted borrowing costs after it slashed interest rates by a total of 200 basis points in 2020 to support the economy during the crisis.

About 50.1 million Filipinos have been fully vaccinated as of Jan. 3, based on latest data from the Department of Health. The government missed its target to fully vaccinate 54 million Filipinos by the end of 2021.

Based on data from the Johns Hopkins University, 45.9% of the Philippine population has been fully vaccinated.

Before the recent uptick in infections, restrictions were eased, which allowed for the gradual reopening of the economy.

The country’s gross domestic product expanded by 7.1% year on year in the third quarter, bringing the nine-month average to 4.9%.

Economic managers upwardly revised their growth target for 2021 to 5.5% last month.

Meanwhile, Nomura Global Research Chief ASEAN economist Euben Paracuelles and analysts Rangga Cipta, Craig Chan, and Wee Choon Teo in a report said they remain cautious on the economic outlook of the Philippines amid the increase in infections in the past days.

“This would hamper further economic reopening and could even lead to a reimposition of lockdown measures, disrupting economic activity and hurting consumer and business confidence, as we saw during the onset of the Delta variant,” they said in a report on Tuesday.

Active infections rose by 5,434 to 29,809 on Tuesday, based on data from the Health Department. The positivity rate picked up to 26.5% from 20.7% on Monday.

It said that while the reimposition of Alert Level 3 in Metro Manila is far from a lockdown, it is “still fairly restrictive” for business establishments’ capacity.

Nomura expects the economy to expand by 6.5% this year. It has a 4.8% GDP growth estimate for 2021.

Economic managers expect GDP to grow by 7-9% this year. — L.W.T. Noble