Philippine growth forecast further downgraded

MANILA, Philippines — More economists are now looking at a slower recovery from the recession this year despite the strong 11.8 percent gross domestic product (GDP) growth in the second quarter.

Chua Han Teng, economist at DBS Bank Ltd of Singapore, said the bank has lowered its 2021 GDP growth forecast for the Philippines to 4.2 percent from the original target of six percent as the emergence of the highly transmissible Delta variant does not bode well for domestic demand amid the mobility restrictions.

“We expect GDP to return to pre-pandemic levels only in late-2022, a laggard among Southeast Asia peers,” Teng said.

The government has placed the National Capital Region and nearby areas under enhanced community quarantine from Aug. 6 to 20 and could be further extended to slow the spread of the more contagious COVID-19 variant.

“It therefore remains to be seen if the two-week lockdown would be sufficient to curb the more infectious variant. The population remains highly vulnerable to further infections given the country’s still-low vaccination rate,” Teng said.

The Singaporean bank said the Philippines has administered COVID-19 doses equivalent to 11.4 percent of the population, of which 9.8 percent has been fully vaccinated.

“(This is) the second lowest among ASEAN-6, just ahead of Vietnam,” Teng said.

According to DBS, risks that the economy could experience another slowdown in the third quarter are rising.

“Mobility is likely to drop significantly, similar to April, weighing on domestic demand, particularly private consumption,” Teng said.

Alex Petropoulos, junior economist at FocusEconomics, said the Barcelona-based think tank lowered its 2021 GDP growth forecast for the Philippines to 5.2 percent from the previous forecast 5.6 percent.

Although the economy bounced back in the second quarter, Petropoulos said seasonally adjusted quarter-on-quarter GDP returned to a contraction from April to June, shrinking by 0.3 percent following the 0.7 percent growth booked from January to March this year.

“The second quarter rebound put an end to a five-quarter streak of falling output and came above market analysts’ expectations of a 10 percent increase. However, the reading was largely due to a low base effect,” Petropoulos said.

Although the GDP growth in the second quarter halted the five-quarter streak of contraction and technically lifted the Philippines out or recession, ANZ Research senior economist Bansi Madhavani said the country is likely to book a slower GDP growth of 4.2 percent this year.