The economy is expected to expand by 5.5 to 6.5 percent this year from a projected decline of nine to 10 percent in 2020 as the country moves towards recovery from the coronavirus disease 2019 (COVID-19) pandemic, an economist said in a virtual briefing yesterday.
But Karl Kendrick Chua, acting National Economic and Development Authority secretary, said while the economy is strong enough to recover, quarantine restrictions prevent the economy from fully recovering, thus the need to open more of the economy as safely as possible.
Victor Abola, economist at the University of Asia and the Pacific, said at the First Metro Annual Economic and Capital Markets Briefing 2021 held virtually that growth for the year will be driven by the expansion of the industry sector.
Abola cited construction and manufacturing as key drivers of growth while the services sector will still suffer amid the pandemic’s impact on travel as well as on hotels and restaurants.
“We will be coming up from a low base. Last year was not a very good year and we expect negative growth in the fourth quarter and possibly in the first quarter of this year,” Abola said.
“We have mild inflation, manageable debt, there’s room for monetary policy, and the recovery may be faster than our conservative projections,” he added.
Abola said overseas Filipino workers’ dollar remittances will become positive in 2021, while the national government will be spending more on its reset, rebound, and recover agenda.
He added the construction of big-ticket infrastructure projects will be on full speed ahead.
“Hopefully, in the second and third quarters of the year, we’ll have the vaccine, and restrictions will be more focused and more localized, at the barangay level or even less,” Abola said.
Growth constraints, however, include supply chain issues, as Abola cited problems on mobility, with public transport still limited under the current quarantine measures.
He also cited that the country has an overvalued currency, and there’s also the high cost of doing business, uneven implementation of lockdown rules, and the slow issuance of permits, among the caveats.
“How fast we will grow will depend on how fast we address these issues,” Abola said.
Meanwhile, Chua told attendees of the National Economic Recovery Forum organized by the Financial Executives Institute of the Philippines yesterday, that while children were kept at home during the pandemic for good reasons, it has prevented family activities, which he said accounts for 30 to 50 percent of the economy.
“One of the things we are working on, and we have to do this carefully and gradually, and always only upon the advice of the health experts, is to see in what way we can gradually lift this remaining restriction, which is not allowing children to go out, because if the family activities don’t come back then we cannot expect the economy to also grow like before, because as I mentioned, we are a consumption driven economy,” Chua said.
“And a big part of that is family -driven. So we are going to work on that, apart from the public transport, but we are going to do that only upon the advice of the experts. But given the experience of other economies, I think there is an opening. For now, however, there are new COVID-19 variants, so we take a step back and we assess when would be the proper time, and how we will manage that risk,” he added.
Chua also said based on Google data, visitors to public transport stations as of January 8 are still down by 50 percent from the pre-pandemic period.
“What that basically means is 50 percent of the people don’t take public transport, because they probably cannot find adequate public transport,” Chua said.
He added the number of people going to work as of January 8 is also still down by around 30 percent relative to the period before the pandemic.
“This is something we are also concerned about, because how will 30 percent of families survive, or have enough income to buy their basic necessities,” Chua said.
“Basically, we need to open more of the economy as safely as we can. Public transport needs to be sufficient yet safe, and we have to recover the lost demand by allowing more family activities,” he added.