Bank of the Philippine Islands’ (BPI) Lead Economist Jun Neri sees a strong, but only partial recovery of output noting that the country is starting to show many signs of improvement.
He said during BPI’s series of webinars attended by its business banking and corporate banking clients that the trajectory toward economic recovery is still a V shape, but a very asymmetric one, where the decline is much faster than the recovery.
“We are expecting a 6.8 percent GDP (Gross Domestic Product) growth for 2021, but our assumptions there are that the vaccine rollout will be able to cover not less than 25 percent of the population by end 2021, that the stimulus is meaningful enough, and that mobility will be on a sustained uptrend,” said Neri.
In terms of total output, Neri explained that the forecast for the country’s GDP in 2021 will not yet be in the same level as the previous year’s GDP.
“We will only be able to fully recover sometime in the later part of 2022. And that’s what makes the Philippines quite unique. It is because we saw the biggest decline in Southeast Asia in overall GDP,” he said.
Neri emphasized that the first indicator of economic improvement is mobility, just as production responds positively to the easing of quarantine measures.
“For groceries and pharmacies, in particular, the Philippines has gone a long way. From a drop in mobility of about 62 percent, we actually saw mobility in groceries and pharmacies exceed pre-pandemic levels in December 2020. So that’s how confident Filipinos became during that month. Now we saw a little bit of decline in January this year, but in February, the people started to move around again. And now it’s just down 6 percent compared to pre-pandemic levels,” Mr. Neri added.
For retail and recreation, the picture is not as rosy, he said. During the Christmas season, retail and recreation was still at 20 percent below pre-pandemic activity and has gone down close to 40 percent as of February.
“But again, this is a huge improvement compared to March, April, and May 2020 when there was only about 20 percent of pre pandemic foot traffic in recreation or retail areas.
Improvement in mobility will likely continue even with the delayed rollout of vaccines compared to other countries as many have adjusted and more willing to go out as they have learned to follow the protocols well. In December, we saw a significant improvement in mobility in retail areas, so we expect this to continue throughout most of 2021,” he added.
As there are more indicators for economic improvement, Neri clarified that recovery will only be a partial one.
“For the fourth quarter of 2020, exports were flat compared to 2019. Whereas in the second and third quarter, it was down 30 percent and 25 percent, respectively. All of a sudden, we saw no more decline for exports. And it’s a good proxy for manufacturing. This seems to show that the Philippine manufacturing sector has been able to adjust to the protocols and have made the necessary adjustment to produce more vs. Jan and Feb 2020, allowing for improvements to continue.”