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Philippine economic recovery to take more time
MANILA, Philippines — The economy still cannot be expected to return to its pre-crisis level by next year as prevailing weaknesses in industries, labor market, and overseas employment prospects will weigh on near-term prospects, said US-based Global Source Partners.
In its recently released quarterly report, the market intelligence firm forecasts an 8.5 percent contraction for the Philippine economy this year and a return to positive growth trajectory next year by a weaker four percent, around only 95 percent of the pre-pandemic economic performance.
Global Source said efforts to restart the economy in the third quarter has been restrained by the continued rise in infections, the two-week return to a strict quarantine, limitations in public transport, fiscal conservatism, as well as weakness in public health institutions.
“We think that not only is a larger 8.5 percent GDP contraction in 2020 more likely now, but government’s projected V-shaped recovery in 2021 is unachievable,” said the firm.
In May, it projected a seven percent contraction for the economy.
“We are, thus, pencilling in a lower four percent growth forecast for 2021, which will bring the economy to only around 95 percent of its pre-crisis level,” said Global Source.
This downgrades the 2021 forecast from five percent projected growth in May.
Global Source said that while there are signs that the economy is recovering in the third quarter of the year, it “cannot restart meaningfully” as infection continues to rise and mobility remains curtailed.
The government has also opted to conserve its resources amid the climate of uncertainty.
“This extra goal of conserving fiscal resources means that available monies is being spread more thinly among competing demands for economic stimulus on one hand, and the costs of strengthening health sector capacity on the other, both necessary for nursing the economy back to health,” said the firm.
“The lack of strong institutional support and effective leadership in managing the public health crisis makes surmounting the budget constraint extra difficult.”
It noted that while market consensus points to a recovery of 7.5 percent next year, this may not be likely because of the still high levels of unemployment and uncertain jobs prospects overseas.
“Moreover, the economy is entering unchartered waters, with shaky sentiments due to collapsing demand and flailing industries accompanied by ongoing restructuring of global supply chains and disruptive innovations that will keep business investments on hold,” said Global Source.
In the near-term, using the country’s scarce financial resources in economic areas with short-term growth potential may help in recovery, said the firm.
This includes the labor-rich agriculture sector where physical distancing will be easier to implement and there is a lot of room for improvements in productivity.
Source: https://www.philstar.com/business/2020/09/08/2040735/philippine-economic-recovery-take-more-time