MANILA, Philippines — By the time President Rodrigo Duterte exits Malacañang next year, he will leave with the economy unlikely back to its pre-pandemic shape, as the country struggles to get out of the coronavirus storm.
Gross domestic product would be back to pre-pandemic levels “sometime at end of 2022, if not early 2023,” Socioeconomic Planning Secretary Karl Kendrick Chua told House lawmakers during the first day of deliberations on the proposed 2022 budget.
This means Duterte’s successor, which will take over in June next year, will likely inherit an economy that has not yet regained its pre-crisis vigor. Based on economic managers’ latest estimates, GDP is forecast to grow 4-5% this year before expanding at a higher annual rate of 7-9% in 2022, with base effects masking what would be a shallow recovery as new lockdowns triggered by the Delta variant cripple the economy.
In 2023 and 2024, GDP growth is expected to ease to its pre-pandemic average rate of 6-7%.
The next administration, of course, may change these targets but Chua nevertheless painted a rosy picture. “Although there are speed bumps ahead… we are now better equipped to sustain continuous positive growth,” he told lawmakers.
The government’s bleak outlook is one that is also shared by many economists. Duterte’s economic team had avoided launching a big fiscal stimulus over losing its investment grade rating, despite calls from observers that a convincing response to the health crisis at the onset would have saved the day earlier. At the same time, vaccinations are still relatively slow and the Philippines remains a long way off from reaching herd immunity, which could help avoid disruptive lockdowns in the future.
During Thursday’s deliberations, Finance Secretary Carlos Dominguez III defended the administration’s fiscal response to the pandemic, saying this “prudence” will “save us from this long battle against the pandemic”.
According to Dominguez, revenues are expected to be back to pre-pandemic level to P3.3 trillion. Despite that, the budget deficit will stay elevated at 7.5% of GDP next year as the country's pandemic needs continue to grow, and more debts are needed to plug the gap. This, Dominguez said, could push up the debt-to-GDP ratio, a measure of the state’s ability to pay its obligations, to the 60% threshold where debt watchers begin to worry.
It is only in 2023, when a new administration would have taken over, that the debt-to-GDP ratio “will start its downtrend,” Dominguez said. By 2024, the budget deficit is forecast to ease to 4.9% of GDP.
“In the face of this unprecedented crisis, we will continue to work hard until the very last minute of our term to ensure a legacy of a dynamic and market-driven economy for the Filipino people,” the finance chief said.