The ASEAN+3 Macroeconomic Research Office (AMRO) cut its economic growth outlook for the Philippines due to recurring new waves of coronavirus infections followed by the retightening of containment measures.
The regional macroeconomic surveillance organization on Thursday, Oct. 7, tempered its 2021 gross domestic product (GDP) forecast for the Philippines to 4.3 percent from a 6.9 percent previous projection given in March.
The revised GDP estimate is within the government’s shaved off growth target of between 4.0 percent and 6.0 percent in 2021.
“The most recent outbreak—by far the most contagious and virulent yet—is attributed to the ‘Delta variant,’ whose rapid spread has seen the retightening of physical containment measures that has put a brake on the recovery momentum for 2021,” AMRO said.
To recall, Metro Manila, which accounts for about a third of the country’s economy, was placed under the strictest enhanced community quarantine (ECQ) between August 6 and 20 to curb the spread of the highly transmissible Delta variant.
The National Economic and Development Authority had estimated that the two-week ECQ had resulted in around P300 billion in production losses.
A year and a half into the pandemic, some 2.62 million confirmed COVID-19 cases and 38,828 deaths have been reported in the Philippines by the Department of Health, as government continues to struggle to contain the spread of infections.
“I think what is important is that the vaccination rate in the Philippines has now been ramped up. And because of that, I think by next year, according to the target, they will be able to achieve the 80 percent vaccination,” Hoe Ee Khor, AMRO chief economist said.
“It [vaccination] is going to be very important, particularly for the Philippines because the Philippines, unlike many of the countries in the region, is a very much a service oriented economy,” he added.
For 2022, AMRO also trimmed its GDP growth projection to 6.7 percent from 7.8 percent estimate in March.
“The Philippines still has quite a bit of policy space available, and you can continue to support the business community and households during this recovery phase,” Khor said.
For this reason, the AMRO chief economist encouraged the government to use all the policy space to avoid the scarring of the economy and allow businesses bounce back faster.
“If they do that I think we’re very comfortable that next year they will going to achieve 6.7 percent growth that we have. If that happened, they’re almost back to pre-pandemic levels,” Khor said.
Along with the GDP projections, the AMRO also revised its inflation forecasts for the Philippines.
Inflation outlook was raised from 3.8 percent to 4.3 percent for this year.
However, the inflation forecast was lowered for next year to 3.2 percent from 3.3 percent.
The Bangko Sentral ng Pilipinas targets inflation to fall within the government’s target band of 2.0 percent to 4.0 percent during that two-year period.