The Philippine Chamber of Commerce and Industry (PCCI), the country’s voice of business and mainly comprised of micro, small and medium enterprises (MSMEs), expects deeper GDP cuts of as much as negative 10 percent this year and 2-4 percent only in GDP growth in 2021, way below the GDP projections painted by the Duterte government.
PCCI President Amb. Benedicto V. Yujuico said at the “Tapatan” forum that its summary for 2020 points to a negative 8 to 10 percent GDP and a positive 2-4 percent GDP growth in 2021. The PCCI growth projections indicate pessimism in the business sector when compared to the more optimistic government estimate of 4.5-6.6 percent GDP drop this year and 7.5 percent GDP growth in 2021.
While there have been improvements in economic activities in the fourth quarter primarily due to the opening of the economy and the expected heightened Christmas shopping for the Christmas season, Yujuico said the PCCI summary for 2020 is “not good.”
The PCCI leader, however, praised, although sarcastically, the country’s domestic currency for being one of the strongest in Asia. He said the peso rate is expected to end the year at P48.20 to the US dollar.
Filipino exporters have complained against the foreign exchange rate policy of the central bank stressing the peso is “overvalued” against the greenback thus, making Philippine exports more expensive and therefore less competitive in the international market.
For 2021, Yujuico said their conservative growth target of between 2-4 percent is commensurate to the small economic stimulus the government has provided to prop up business and the economy. Looking into their businesses, he said, they have to be conservative also because along with the conservative fiscal stimulus. “Although we see the light at the end of the tunnel, we are not yet out of the COVID problem,” he said.
He expressed hope that the President will sign the 2021 budget before the end of the year to ensure continued implementation and no delays in project implementation. He also has high hopes for the signing into law of the CREATE and the FIST measures before yearend.
With these, he said, the economy will continue to improve towards the first half along with the rehiring of workers for the MSMEs and the large corporations.
The second semester of 2020, he said, would see additional injections from election campaign expenses as politicians start mobilizing for the May 2022 presidential elections. “So, to speak, the economy will do well in 2021,” he said.
In terms of sectors, companies that adapt innovations and digital technologies like the delivery operators are going to benefit and ramp up to full recovery in 2021, but those that did not will have to lag behind.
Tourism particularly aviation, hotel and accommodation facilities will continue to be laggards because people will refrain from travel over the next three to four years.
PCCI will conduct another survey in the first quarter of next year for a clearer idea of how businesses are doing.
There are some headwinds though in the economic recovery process like the vaccination. Yujuico said that even with the availability of vaccines, it would not be possible to inoculate the entire over 100 million Philippine population in a year.
“I did some arithmetic, assuming we have a vaccination rate of 300,000 a day, you will be surprised it will take more than a year to have them all vaccinated. Another thing that is yet unknown is how long the vaccine efficacy would last,” he said.
The West Philippine sea dispute against China is another factor that is of concern to business. The election season also brings in market uncertainty because new leadership could also mean dramatic changes in policies. In addition, the US-China trade dispute will continue to be in the minds of businesses and will factor in their plans.
With all these headwinds, Yujuico said it should be a surprise if “we see bad loans and foreclosure increase beginning of 2021.”
In the midst of the pandemic, a PCCI survey showed that 50 percent of businesses have stopped operating. But Yujuico said more establishments have opened up as government opened up more sectors at higher capacities with the easing of quarantine.