Stronger recovery expected in 2021

MANILA, Philippines — The Philippines is on its way to a stronger recovery as gross domestic product (GDP) is now seen to grow by 7.8 percent next year instead of the original projection of a 5.2 percent expansion, a unit of credit rating firm Moody’s said.

Steven Cochrane, chief economist for Asia-Pacific at Moody’s Analytics, said the Philippines is slowly digging itself out of a deep hole starting in the third quarter, on its way to a stronger rebound next year.

He said the country, however, may  post a deeper GDP contraction of 9.2 percent instead of 4.5 percent this year.

“The Philippines is digging itself out of a deep hole after declining quarter-to-quarter by over five percent in the first quarter and by 15 percent in  the second quarter. With the easing up on movement restrictions in the third and fourth quarters, the economy will begin to improve as households accelerate consumption and manufacturers raise production,” Cochrane told The STAR.

The research arm of Moody’s Investors Service expects a lower GDP contraction of 9.5 percent in the third quarter and a modest contraction of four percent in the fourth quarter.

However, Cochrane said real GDP would not exceed its peak in the fourth quarter of 2019 until the second quarter of 2022.

“This delay is caused by the depth of the downturn caused by the long and very strict community quarantine orders in much of the country, and due to the modest fiscal support that so far has been pledged by lawmakers to support the economy and rebuild. Global trade is improving as well and exports should contribute to growth before this year is out,” he said.

According to Moody’s Analytics, it does not expect that many of the infrastructure projects that were underway prior to the pandemic would resume and contribute to employment and economic output.

“And as the rest of the global economy improves, remittances by overseas Filipinos will improve and help support the economy once again. A persistent drag on the economy will be the slow return of international travel and tourism, which will likely be that slowest component of the economy to recover,” Cochrane said.

Moody’s Analytics said uncertainties remain in the Philippines and Indonesia as most of  Asia Pacific  has enjoyed an early bounceback because of relaxed restrictions.

It said the Philippines and India would see some of the strongest growth rates in the coming years, but this is in large part due to their deep downturns in 2020, which make for easier year-to-year comparisons.

“Further, these forecasts are perhaps the most uncertain, since neither country has clearly shown that it has effectively controlled the virus, nor has either committed fiscal resources toward recovery to the degree seen elsewhere in the region,” the Moody’s unit said.