L-shaped economic recovery seen

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    ING Bank sees the economy growing 4.7 percent this year as the country bounces back from the debilitating effects of the new coronavirus disease 2019 (COVID-19) last year.

    Nicholas Mapa, ING Bank Manila senior economist, said the the Philippines may now experience a “dirty L-shaped” economic recovery from pre-pandemic 6.2 percent GDP growth levels.

    Mapa added economic pickup will be helped by a low base starting in the second quarter of the year when the severe impact of the COVID-19 response, such as the imposition of lockdowns, started to take its toll on the economy.

    Mapa said the COVID-19 debacle knocked the Philippines back to 2016 GDP levels, with unemployment picking up and consumer and business confidence dipping low.

    The challenging job market coupled with the anxiety over the virus have consumers worried, noted Mapa, while investments are stalling as shown by bank lending in contraction.

    Mapa said capital formation is not likely to return soon as bank lending grinds to a halt.

    He said the central bank’s rate cuts last year have not translated to a lending uptick and the excess liquidity is only flowing into the secondary market.

    Mapa said supply chain bottlenecks will push inflation up though not as high as the 2018 period.

    Mapa said the inflation may breach central bank target of 2 to 4 percent.

    Mapa also said consumer loans may lead other sectors in recovery which may occur “close to 2022” as jobs outlook also improve.