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Lingering economic woes risk turning Philippines into basket case
MANILA, Philippines — Economic struggles on the domestic front are putting the Philippines at risk of becoming a basket case as it is unlikely to ride on the much needed herd immunity with the rest of emerging Asia.
In a report, UK-based Pantheon Macroeconomics has remained pessimistic about the growth path of the Philippines this year even as the rest of the world slowly recovers from the pandemic.
“The Philippines risks becoming a basket case, as it is unlikely to reach herd immunity until 2023. We are the least confident about this projection due to the country’s high vaccine hesitancy,” Pantheon senior Asia economist Miguel Chanco said.
In technical terms, to become a basket case means that the country’s economy and financial standing are in a “seriously bad taste.” It can also be defined as being in a hopeless condition.
It is often associated with high unemployment, high inflation, poverty, or political instability.
For the Philippines and for the rest of the world, achieving herd immunity is crucial in fully reopening the economy and allowing it to recover after more than a year of restrictions.
While Pantheon said the scenario in emerging Asia is evolving rapidly and the light at the end of the tunnel is now visible for large parts of the region, the same cannot exactly be said for the Philippines.
The think tank estimates that the Philippines will achieve herd immunity only by early 2023. This compares with neighboring Thailand and Indonesia, which are also experiencing a surge in COVID-19 cases, with immunity expected by the second and third quarter of 2022, respectively.
Even India, which suffered a severe second wave, is seen attaining herd immunity by the third quarter of this year.
“The domestic outlook [for the Philippines] remains bleak, leaving aside catch-up growth from the most favorable base effects in ASEAN,” Chanco said.
“Capital expenditure probably will receive a lift from projects being front-loaded ahead of the May elections. But this will come at the expense of the first half of 2022, and the slump in corporate loans points to continued softness thereafter,” he said.
In the Philippines, only 12 million doses have been administered since vaccination started in March.
About 2.7 percent or 2.92 million Filipinos have been fully vaccinated while those who were given at least one dose reached 9.04 million or some 8.4 percent of the population.
But, COVID-19 vaccination in the country has hit another snag as many local government units have stopped giving first doses due to lack of supply.
The government earlier boasted that it has secured 113 million doses of COVID-19 vaccines from five manufacturers.
Further, Pantheon said consumption is unlikely to find meaningful support from remittances, with growth expected to remain subdued due to the still-declining number of overseas Filipino workers.
Likewise, households are also looking to rebuild savings after last year’s substantial drawdowns.
“A re-acceleration in inflation, on the back of the lagged pass-through of rising oil prices, will add insult to injury in the rest of 2021, a threat the Bangko Sentral ng Pilipinas continues to downplay,” Chanco said.
Pantheon estimates that headline inflation will average at 5.3 percent for 2021 before easing to 4.4 percent next year.
Its latest estimate is more than double the 2020 inflation rate of 2.6 percent and is well above the revised upper target of the BSP at four percent.
Source: https://www.philstar.com/business/2021/07/09/2111112/lingering-economic-woes-risk-turning-philippines-basket-case