The Philippine economy is projected to post a significant growth in 2021, following the crisis experienced this year due to the coronavirus disease 2019 (COVID-19) pandemic.
According to the latest issue of the Market Call, as published by the First Metro Investment Corp. and the University of Asia and the Pacific Capital Markets Research, a sharp recovery in the country’s gross domestic product (GDP) growth rate is expected next year, with the sizeable fiscal stimulus and firms getting into the full “new normal” mode.
“With a huge $30 billion stimulus plan in the works and normalization of business operations, we project a notable rebound in GDP growth in 2021 by eight to nine percent,” the report said.
“With the enhanced community quarantine of Metro Manila lasting for two months from April to May, we expect a more drastic GDP slowdown in the second quarter, but its relaxation for most of the country should push the economy to expand at a faster pace in the second half, albeit much below the above-six percent norm of the recent years,” it also said.
The report noted that domestic demand, the main driver of the economy, will likely slacken further in the second quarter as two main components, consumer and investment spending, weaken anew.
“Consumers have had to make-do with spending on basic necessities given the lack of income due to the lockdowns or layoffs as firms face an uncertain future, and so their spending will likely fall in Q2,” the report said.
“Although aggregate demand will wane, this may not result in very low inflation rates (or deflation) because limitations on the supply side (i.e., limited output, disrupted supply chains, etc.) may have a stronger effect. Thus, we don’t expect inflation to go below two percent year-on-year in Q2,” it added.
The report also pointed out firms have focused on a post-COVID-19 scenario which may require less employees or more outsourcing, and less spending on hardware or physical assets, and more on their digital transformation.
“Thus, the administration is relying on government spending (both on subsidies and infrastructure) to reboot the economy as it moves away from the constraints imposed by COVID-19 pandemic,” it said.
Meanwhile, economist Dr. Bernardo Villegas projects a 2.7 percent growth rate for the economy, saying the Philippines will be one of the countries that can recover faster from the impact of the pandemic.
“The Philippines will be one of the least negatively affected in a global recession,” Villegas said at the “Prospects for the Philippine Economy in 2020 and Beyond” webinar sponsored by Allianz PNB Life.
Villegas sees growth opportunities in the Philippines’ health sector curative or preventive which also opens opportunities for the insurance industry that provides security through various health insurance products covering medical expenses and even preventive medicine as well as life insurance with accident and death benefits.
Villegas said agribusiness, digital industry and education as growth areas. But Villegas said travel and tourism industry, fashion, furnishings non-digital entertainment and “anything considered luxurious will take a back seat.”
However, domestic travel might be able to bounce back if “greater emphasis” is given to areas that can be the next Metro Manila such as Batangas, Central Luzon, and Iloilo. Opportunities for the Philippine economy are spurred by our young and growing English- speaking population, Villegas said.