"Attaining forecasts is important. Unattained forecasts have a depressing effect on the morale of the people."
The recovery that follows an economic downturn as sharp as the past year’s puts every economy’s prognosticatory skills to a severe test. The recovery from the current downturn will not be an exception.
Given the severity of this country’s GDP (Gross Domestic Product) contraction, with GDP contracting by a staggering 16.4 percent in the second quarter – the tendency of economic forecasters is to make forecasts that either equate sharp contraction with sharp recovery or are palpably timid. This extremist approach to forecasting following a particularly sharp economic contraction is evident in the 2021 GDP – recovery forecasts that have been made public in recent days.
The highest of proffered estimates appears to be 9 percent; on its face this figure has an out-of-the ballpark quality about it. The next highest forecasts are clustered in the 6- to-7 percent area. The fact that 6-to-7 percent was their pre-pandemic forecast for 2020, Philippine GDP growth suggests that many financial institutions and business organizations – and the administration of President Rodrigo Duterte – believe that the Philippine economy will execute a swift and strong recovery from the pandemic-caused recession.
At the other end of the forecasting spectrum are the financial-institution and business-organization economists who are very wary of the slowing effects of fear and uncertainty on corruption – this is approximately two-thirds of GDP which largely determines production, especially manufacturing. Believing that most Filipinos are unlikely to rush to resume their pre-pandemic consumption patterns after 2020, a number of economic forecasters are seeing 2021 GDP growth rates of barely-positive to very modest proportions, i.e., form zero to 2 percent, the market manifestation of intangible factors like uncertainty and fear are extremely difficult to measure, but what can be stated with absolute accuracy is that consumers are unlikely to patronize commercial places and service establishments with the same pre-pandemic regularity until they feel at least reasonably sure that they will not catch COVID-19 in such venues.
Given that there is bound to be recovery in 2021 but not sharply-upward projections, the fast approach to 2021 GDP forecasting is one that strikes a balance between exuberance and reasonable optimism.
With the progressive easing of the quarantine regulations – this country’s lockdown has been the longest in the world – the economy is bound to start recovering but the recovery is almost certainly not going to be of the up-up-and-away kind. The recovery will be moderate and gradual. PCCI (Philippine Chamber of Commerce and Industry) recently came out with a 2-to-4 percent forecast for 2021 growth of the country’s GDP. That looks about right.
Attaining forecasts is important. Unattained forecasts have a depressing effect on the morale of the people. An unattained 6-to-7 percent forecast for 2021 GDP growth will produce that effect. On the other hand, a modest forecast that proves to be an underestimate, to try creating the impression of an economy that in reality is stronger, is something highly desirable.
