‘Economic damage less severe despite Omicron’

MANILA, Philippines — The impact of the Omicron coronavirus variant on the Philippine economy is expected to be less severe, but growth will still be lower than expectations this year.

In an email to The STAR, Oxford Economics assistant economist Makoto Tsuchiya said the forecast growth in gross domestic product (GDP) for the Philippines this year is 6.5 percent, higher than the expected 4.6 percent growth in 2021, but short of the government’s seven to nine percent target.

“We expect the near-term outlook will be dampened by the emergence of the Omicron variant and related tightening in restrictions,” Tsuchiya said.

He noted that emerging markets (EMs) such as the Philippines entered 2022 facing a resurgent pandemic, threatening some softening in demand in the first quarter, alongside continued supply-chain disruption.

“But we think the economic damage will be better contained compared to the one seen during the Delta surge,” he said.

Even as the Philippines is experiencing another surge and record-high daily cases, Tsuchiya emphasized that gradual movement toward economic normalization and higher vaccination rate would support confidence and activity.

While the current alert level system was reverted to a notch stricter, the government is no longer implementing large-scale lockdowns that can significantly hurt economic activities.

Vaccination also continues to be ramped up, with about half of the population now fully vaccinated.

“Nonetheless, renewed outbreaks remain a risk while longer supply chain disruptions will hinder the recovery,” Tsuchiya said.

“Increasingly hawkish attitude from the (US) Fed also poses a risk to the financial market, which could put further downward pressure on the peso,” he said.

With the latest forecast, among the EMs, the Philippines will lag behind in terms of economic growth as compared to India’s 7.9 percent, but higher than China’s five percent.

EMs, on average, are expected to post a 4.6 percent growth, a slowdown from the expected 6.7 percent growth in 2021.

In Southeast Asia, the Philippines’ GDP is seen to be slightly lower than that of Malaysia’s 6.6 percent, but better than Indonesia’s 5.8 percent and Thailand’s 5.1 percent.