By ANGELA CELIS and JIMMY CALAPATI
The country’s economic managers yesterday said they expect a strong economic recovery starting from the second quarter of this year as the quarantine restrictions are lifted and new coronavirus disease 2019 (COVID-19) vaccines are continuously rolled out.
Karl Kendrick Chua, National Economic and Development Authority (NEDA) secretary, said the main difference between last year’s enhanced community quarantine (ECQ) and this year’s is that the government did not shut down 75 percent of the economy.
“We allowed the public transport to operate even during this year’s ECQ,” Chua said during the Economic Journalists Association of the Philippines mid-year economic forum.
“More people are going to work. In terms of mobility, we are just 25 percent down from the normal period, compared to last year when we were around 50 to 80 percent down. This shows the kind of recovery that we are expecting in the second quarter,” he added.
According to Chua, the latest labor force and trade data as well as the Google mobility data suggest a “strong positive growth in the second quarter.”
Benjamin Diokno, Bangko Sentral ng Pilipinas Governor, said the economy has the essential elements — smaller declines in the GDP, manageable inflation, healthy external position, ample fiscal space — to rebound this year despite the challenges caused by the pandemic.
“The economy was able to register sustained improvements on a quarter-on-quarter basis.
From the 17 percent contraction recorded in the second quarter of 2020, the peak of the lockdown, the e economy managed to post smaller declines in the succeeding quarters, with only -4.2 percent in Q1 2021,” Diokno said
“This improvement is expected to continue in the succeeding quarters of 2021 with more massive roll out of the COVID-19 vaccines and a more strategic implementation of community restrictions,” Diokno added, stressing that multilateral agencies expect the Philippine economy to expand by 4.5 percent to 6.9 percent this year.
These are broadly in line with the national government’s projection of 6.0 to 7.0 percent for 2021.
“The country also has a favorable medium-term growth prospects based on the stable outlook affirmed by major credit rating agencies,” Diokno said.
In a wave of downgrades and negative outlook revisions across the globe, the Philippines’ credit rating continues to receive affirmations and stable outlooks.
S&P Global recently affirmed the Philippines’ investment grade credit rating of BBB+ with a stable outlook, the highest among its ratings with international debt watchers and a step away from the minimum rating within the A territory.
Fitch Ratings rates the country’s credit rating one notch lower at BBB and at its equivalent Baa2 by Moody’s Investors Service.
A stable outlook indicates “the absence of factors that could trigger an upward or downward adjustment in the rating over the short term.”
Carlos Dominguez, Department of Finance (DOF) secretary, in the same event, said while the Philippines may be behind other regional economies at this time in bouncing back from the malaise of the global pandemic, the country’s recovery will be stronger on the back of its sound economic fundamentals.
“We might appear to be behind our neighbors for now, but our recovery will be stronger because of our sound fundamentals,” Dominguez said.
He said the COVID-19 vaccination program, which “has been rolling out quite well …. gives us hope that we can now fully reopen our economy.”
Dominguez said when the pandemic-induced crisis hit the country last year, the government did not have to go back to the drawing board to plan for the country’s economic recovery because “much of the spadework was done” over the last five years of the current administration.
“Clearly, we avoided a lot of trouble. All the strengths that became evident when the challenges were greatest are not due to a stroke of good fortune…They are the results of many years of fiscal discipline, forward-looking policy reforms, and continuing improvement in our administrative systems–especially through the adoption of new digital technologies,” he added.
Chua said to help achieve positive growth this year and next, there is a need to manage the risk and open up as many of the sectors as safely as possible, prudently use resources to target and help those most affected, and ramp up the vaccination program.
“No matter how much stimulus or money you give, if you artificially prevent the economy from operating then there’s no way to get out. So stimulus actually works if the economy is allowed to operate so that consumer demand can return and the additional stimulus can be used to further help the businesses,” Chua said.
“But if you close the economy or artificially don’t allow it to operate or prevent half of the economy including families and their children from going out, then no matter what money you put or pump prime, they will not be able to fully help. That is why we have to look at this recovery from a bigger perspective,” he added.
Chua said there are three pillars that will govern this recovery.
The first is the reopening the economy at the appropriate time and allowing an expanded age group to go out with safeguards, including the resumption of face-to-face learning in low-risk areas.
The second is the accelerated implementation of the recovery package, consisting of more than P2 trillion or 15 percent of GDP, in terms of fiscal, monetary, and financial resources.
The third is the timely implementation of the vaccination program.
According to Diokno, the government has to be “more strategic in addressing possible resurgence in cases and in expediting vaccination.”
“We have to be ready for the possible spillover risks resulting from differentiated and divergent recoveries. We need robust institutions and sustained policy discipline to see us through this COVID fog,” Diokno said.
On monetary policy, Diokno said the BSP will “remain vigilant over the current inflation dynamics to ensure that the monetary policy stance continues to support economic recovery to the extent that the inflation outlook would allow.”
With inflation now seen to hit the target range of the government for this year and next, the policymaking Monetary Board last month decided to keep the key rates of the Bangko Sentral ng Pilipinas steady. The BSP’s overnight reverse repurchase facility stays at 2.0 percent. The interest rates on the overnight deposit and lending facilities were likewise kept at 1.5 percent and 2.5 percent, respectively.
Diokno stressed the expected path of inflation and downside risks to domestic economic growth warrant keeping monetary policy settings steady.
