First Metro Investment Corp. and the University of Asia and the Pacific said in a report the Philippines’ 2021 economic growth could hit the lower end of their own full-year projection of 5 to 6 percent.
According to the latest issue of their joint report, Market Call, released yesterday, the overall outlook for the Philippines’ full-year gross domestic product (GDP) growth has brightened, with the second quarter figure coming at the higher end of market expectations.
In the second quarter, the economy expanded by 11.8 percent, as it came from a decline of 17 percent in the same period last year, when tighter quarantine restrictions were in place.
“However, the caveats are when one looks at seasonally adjusted quarter-on-quarter data, GDP slipped by 1.4 percent, and the extent of the impact of the new lockdowns,” the report said.
“These lead us to think that the low side of (or slightly below) our five percent to six percent full year projection would land us in the safe zone,” it added.
The report’s projected growth range however remains higher than the Philippine government’s updated estimates.
The Development Budget Coordination Committee (DBCC) recently slashed its growth assumption for the Philippines this year amid the implementation of tighter quarantine restrictions in various areas of the country, due to the heightened risks brought about by the coronavirus disease 2019 (COVID-19) Delta variant.
DBCC revised its growth projection for 2021 to four to five percent, from its earlier assumption of six to seven percent, which was also revised downwards in May from the original forecast of 6.5 to 7.5 percent.
The Market Call pointed out that at the onset of the third quarter, manufacturing continues to expand as the manufacturing purchasing managers index clocked at 50.4, although slightly slower than 50.8 in June.
“Employment gains receded in June and may further get smaller in July as the government imposed tighter quarantine restrictions in Metro Manila+ citing a sharp rise in infections of COVID Delta variant,” the report said.
“Exports, however, remained robust with its 17.6 percent jump in June even though slower than a month ago. However, we note that in terms of levels exports (at $6.5 billion) it greatly exceeds levels in January and February 2020, as well as those of June 2019,” it added.
The report also pointed out that national government spending, boosted by infrastructure spending, continues to expand.
“Year-to-date by June, it had risen by 9.6 percent year-on-year, which should be positively considering the huge subsidies in April and May 2020,” it said.
Meanwhile, the Market Call said headline inflation may not drop below four percent in the third quarter because of the low base a year ago.
“But with crude oil prices sharply falling in August, and food prices stabilizing, it will likely go below that threshold early in the fourth quarter,” the report said.
“While we see space for a possible further easing of monetary policy (via reduction in reserve requirement or lower policy rate), the good Q2 GDP print will see it happening only with negative macroeconomic data, which cannot be ruled out due to the new quarantine restrictions,” it also said.
