Philippines poised for strong rebound

MANILA, Philippines — New York-based GlobalSource Partners and Barcelona-based FocusEconomics expect a strong economic rebound for the Philippines next year.

Former finance undersecretary Romeo Bernardo and Christine Tang, country analysts of GlobalSource, said the Philippines may expand by five percent in 2021 after a seven percent contraction this year.

Bernardo and Tang said the recovery next year would not be as sharp as government expects considering the current timeline for vaccine development which, given lead times to manufacture and distribute locally, would probably take up to mid-2021 before the country is adequately vaccinated.

“We have penciled in for now a five percent gross domestic product (GDP) growth for next year, which will not bring the economy back to where it was in 2019,” they said.

GlobalSource expects the country’s GDP to contract by seven percent this year, ending a streak of positive GDP growth over the last 22 years. The country’s GDP last contracted in 1998 with 0.5 percent due to the Asian financial crisis.

The country’s GDP contracted by 0.2 percent in the first quarter, ending 84 straight quarters of positive GDP growth. The Philippine GDP contracted by three percent in the fourth quarter of 1998.

“At this time, we cannot rule out a more pessimistic outcome of double-digit GDP contractions, which will happen if a second wave of widespread infections occur necessitating another extensive lockdown,” they warned.

The economic cost of the implementation of the enhanced community quarantine that led to a pause in business activities reached an enormous P1.1 trillion or 5.6 percent of GDP.

“While government is starting to loosen lockdown conditions, we do not see the economy returning to positive growth before 2021, i.e., the recovery in the upcoming quarters will not be as quick nor as sharp as government expects,” Bernardo and Tang said.

GlobalSource expects inflation to remain steady at 2.5 percent this year before accelerating to 2.9 percent and the peso depreciating to 51.91 to $1 this year and to 53.02 to $1 in 2021.

On the other hand, Barcelona-based FocusEconomics see the Philippine GDP growing by 7.5 percent in 2021 after contracting by 3.7 percent this year due to the pandemic.

“GDP contracted for the first time since 1998 in the first quarter, hit by disruptions from the Taal Volcano eruption in January, the COVID-19 pandemic and subsequent lockdown put in place in March,” FocusEconomics said.

Moreover, the think tank said the economy is expected to have worsened further at the start of the second quarter due to the lockdown and a sudden downturn in the global economy.