By IRMA ISIP and JIMMY CALAPATI
Trade Secretary Ramon Lopez said the government is taking a pause in reopening the economy to help stem the rise of new coronavirus disease 2019 cases.
Lopez expressed confidence economic recovery will start in the second quarter in the face of an observation by Moody’s Analytics that the Philippine economy will likely begin to accelerate by the fourth quarter of this year, citing the slow vaccine roll out and ineffective quarantine measures as key factors.
In his remarks at the Association of Franchises Association Inc.’s event yesterday, Lopez said the country needs to proceed with the safe and gradual reopening of industries.
“But for now with cases rising we will be more careful, in fact we are on a pause in reopening to help in sustaining improvements in the economy,” Lopez said.
He added: “Recovery will start in the second quarter, from a negative growth to positive in the second quarter and even the third quarter. While there has been a significant decline (in macroeconomic numbers in 2020), we have noted improvement in the succeeding quarters (after Q2 in 2020) in terms of GDP, unemployment, export, manufacturing indices.
We have not hit pre-pandemic levels but at least (the numbers are) improving,” Lopez said.
With the vaccine rollout, Lopez said consumer and business confidence will return.
“We can restore the jobs and be able to create ore sources of income and stimulate demand,” Lopez added.
Lopez said an impact assessment survey conducted by the Department of Trade and Industry showed further reduction in the number of enterprises that closed as of March, to 4.6 percent of respondents from 5 percent in November,10 percent in October and a peak of 34 percent in April.
But Benedicto Yujuico, president of the Philippine Chamber of Commerce and Industry said even as restrictions eased, companies continue to see sharp drop in sales.
Yujuico said this mainly due to combined restrictions in mobility and fear of people to travel to buy goods or avail of services.
Yujuico in a statement said the Philippines needs to catch up and cannot risk being left behind again and revert to being the “basket case” of Asia.
Lower than forecast
Steve Cochrane, chief Asia-Pacific economist at Moody’s Analytics, said the acceleration of the Philippine economy is possible in the fourth quarter “as vaccinations finally begin to make a difference in immunity and the ability to finally ease up on quarantines.”
“Then in 2022 there will be much ground to make up and we should see a stronger rebound,” Cochrane said.
In a report titled “Much potential for 2021H2,” Cochrane said the country’s gross domestic product (GDP) would grow by 6.3 percent this year and 7.2 percent next year.
Cochrane’s forecast is still lower than the government’s forecast range of between 6.5 and 7.5 percent for this year and 8.5 and 10 percent for next year.
The economy is technically in a recession after it posted its worst contraction on record in 2020 as it shrank 9.5 percent due to the impact of the coronavirus disease 2019 (COVID-19) pandemic.
Cochrane said the country faces challenges “on many fonts,” with the ability to roll out the COVID-19 vaccine “sufficiently quickly across the country” on top.
When sought for comment on Moody’s Analytics forecasts, Acting Planning Secretary Karl Chua said these are not far from the targets set by the Development and Budget Coordination Committee.
“We need to work together to open the economy safely, implement the recovery package with haste, and implement the vaccine program on time,” adding these are the government’s strategy for recovery this year.
Cochrane said the Philippines started late and is moving slowly in its vaccination program.
Vaccines from donors only started to arrive end of last month. China donated 600,000 doses of CoronaVac from Sinovac last February 28, while COVAX sent 487,200 doses of AstraZeneca last March 1 and 38,400 last March 7.
Latest figures from the government showed that 216,794 healthcare workers, of the estimated 1.7 million to 1.8 million medical workers nationwide targeted to be vaccinated by May, have so far been vaccinated as of March 16.
A lot like 2020
Nicholas Mapa, ING Bank Philippines senior economist, said “rising inflation and the threat of rising borrowing costs compound the challenges faced by Filipinos exponentially as 2021 is now starting to look a lot like 2020.”
“We had previously priced-in a vaccine rollout to extend into the second half or next year given the tight global supply and challenges for distribution to an archipelagic country. The lack of vaccine availability, persistent spread of new infections and the ongoing economic recession have all combined to deflate once-vibrant consumer sentiment,” Mapa said.
With the labor market in tatters, remittances in contraction and cases on the rise, Mapa said the country’s GDP “will post a modest expansion in 2021 at 5 percent, driven primarily by favorable base effects from last year’s tumble of 9.5 percent.”
Less policy support
“We cannot be sure that the spread of Covid-19 can be curtailed until vaccinations are more widely available because the quarantines in Metro Manila have not been completely effective. The recent curbs on movement confirm this,” Cochrane said.
But he also cited the lack of aggressive fiscal-policy support which, according to him, means that “a rebound in employment and small business operations from the long quarantines will be slow due to the need for small businesses to start up all over again and for workers to find employment.”
Cochrane said the high inflation due to the rise in pork prices because of swine flu means “there will be less disposable income to support a turnaround in consumer goods and services.”
Headline inflation rose further to 4.7 percent year-on-year in February from 4.2 percent in January, data from the Bangko Sentral ng Pilipinas showed.
Core inflation, which excludes selected volatile food and energy items to depict underlying demand-side price pressures, increased slightly to 3.5 percent in February from 3.4 percent in the previous month.