The Philippine economy is expected to rebound by 8 percent to 9 percent in 2021 on the back of strong stimulus package from an expected contraction of 2 percent to 3.4 percent this year amid the coronavirus pandemic.
Economists from the University of Asia & the Pacific and First Metro Investment Corp. said in a joint report said the two months of enhanced community quarantine from mid-March to May would translate into a deeper GDP decline in the second quarter.
“A return to some form of normalcy may speed up by July, when government dismantles the lockdown in most of the country and get the economy running at a faster pace in the second half,” they said.
“However, this may prove insufficient to avert the first annual decline in GDP in 22 years, given the new health protocols and the difficulties in reestablishing supply chains. However, the sizeable fiscal stimulus and firms get into the full ‘new normal’ mode, we expect a sharp GDP recovery of 8 percent to 9 percent in 2021,” they said.
Data from the Philippine Statistics Authority showed that the GDP contracted by 0.2 percent in the first quarter, a turnaround from the 5.7 percent in the same period last year and 6.4 percent in the fourth quarter of 2019.
The National Economic and Development Authority expressed optimism the economy would rebound strongly in 2021 by 7.1 percent to 8.1 percent.
NEDA said the timely implementation of well-targeted recovery program alongside efforts of the private sector would mitigate the impact of the pandemic. It said such a program would help the country regain confidence, attain higher economic growth and restore employment rates to pre-crisis level.
The inter-agency Development Budget Coordinating Committee said earlier that the debt level remained manageable, as the country enjoyed its lowest-recorded debt-to-GDP ratio of 39.6 percent last year.
It said the Philippines has strong economic fundamentals and sound fiscal health. The DBCC reiterated its commitment to work with the government in responding to challenges brought about by the COVID-19 while helping drive a rapid economic recovery.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno said that despite the gloom due to the pandemic, there was reason for optimism on the prospects of the Philippine economy.
Diokno predicted a “U-shaped” recovery for the economy, particularly in the latter part of 2020. He cited the foreign exchange buffer, low public sector debt, manageable external payments position and a solid credit profile.
Diokno said Philippine banks were well-capitalized, liquidity positions were strong and non-performing loans were low, demonstrating the effectiveness of progressive banking regulatory reforms the BSP has implemented over the years.
The Philippines was ranked the 6th most robust in a recent survey released in May by The Economist among 66 emerging economies on four measures of financial strength such as public debt, foreign debt, cost of borrowing and reserve cover.
The economy grew by 6 percent, the low end of the government’s target range of 6 percent to 7 percent, despite the delay in the approval of the P3.7-trillion national budget.
