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AMRO slashes forecast growth for Philippines in 2021
MANILA, Philippines — Singapore-based ASEAN+3 Macroeconomic Research Office (AMRO) has slashed its 2021 economic growth outlook for the Philippines amid continued difficulty in containing COVID-19 cases.
In its latest ASEAN+3 Regional Economic Outlook report, AMRO estimates that the Philippines’ gross domestic product (GDP) may grow by 6.9 percent this year, much lower than its previous growth forecast of 7.4 percent.
The ASEAN think tank’s latest forecast falls within the government’s target of 6.5 to 7.5 percent growth for 2021.
“For this year, we expect that the growth rate will be among the better ones in the region since base effect last year was so weak, but that does not mean that output will be recovered this year,” AMRO economist and lead author Anne Oeking said during the virtual launch of the report on Wednesday.
“In the short term, it’s really those pandemic-related risks that are important. We cannot expect the economy to strongly recover until the virus is under control,” she said.
AMRO’s forecast puts the Philippines in the third fastest GDP growth in ASEAN+3 this year, after China’s 8.7 percent and Vietnam’s seven percent.
Last year, the Philippine economy shrank by 9.5 percent, its worst in several decades and sharpest among the largest economies in Asia and the Pacific region.
This was due to uncontrolled COVID-19 outbreak combined with strict nationwide lockdowns and mobility restrictions, a succession of natural disasters, and delays in budget execution which weighed on public investment.
“The Philippines was hit hard in 2020, it’s a domestic demand and services driven economy so it was heavily disrupted from lockdown measures last year. And what we saw was with easing of measures, remittances still flowing in and policy support, the economy has started to rebound,” Oeking said.
AMRO highlighted that while the Philippines had made progress in containing the virus toward the end of 2020, it continues to face multiple risks and challenges on the path to recovery.
This is evident in the surging COVID-19 cases, which breached the 10,000-mark daily average. In fact, Metro Manila and four nearby provinces were returned to the strictest quarantine measure to contain the spread.
AMRO said further risks to recovery may come from another prolonged wave of COVID-19 infections, a slower-than-expected global recovery, potential financial distress of businesses in the short term, and possible lower potential growth owing to the scarring effects of the pandemic in the medium to long term.
It added that mitigation of these risks mainly hinge on the effective management of COVID-19 infections, a calibrated reopening of the economy and speedy passage of key reforms.
“What is important now is targeted containment that is decisive, effective and proactive, as well as the speedy rollout of vaccines,” Oeking said.
While COVID-19 inoculation has been in full throttle in major economies, developing nations like the Philippines continue to face challenges in terms of securing supply, distribution and logistical impediments.
“The worldwide resurgence of new infections since November 2020 could delay the fragile global recovery,” AMRO said.
“A service-oriented and micro, small, and medium enterprise-dominant economic structure also makes any economic recovery in the Philippines more arduous,” it said.
For ASEAN+3, the region may grow by 6.7 percent this year and 4.9 percent in 2022, after contracting marginally by 0.2 percent last year.
The region, which is home to 30 percent of the world’s population, collectively accounts for only three percent of the total number of confirmed COVID-19 cases globally.
Source: https://www.philstar.com/business/2021/04/01/2088376/amro-slashes-forecast-growth-philippines-2021