Economists from First Metro Investment Corp., the investment banking arm of the Metrobank Group, and University of Asia & the Pacific on Wednesday reduced the 2021 gross domestic product growth forecast to a range of 5 percent to 6 percent from their previous estimate of 5.5 percent to 6.5 percent, taking into account the lockdowns imposed in the first quarter in NCR Plus.
UA&P Prof. Victor Abola said during the FMIC and UA&P mid-year economic briefing they considered the 4.2-percent GDP contraction in the first quarter and the lockdown in March and April in their latest full-year growth forecast.
“Part of that was the renewed lockdowns… and the negative growth in the first quarter. But this is a minor revision and it is aligned with the government’s projection [of 6 percent to 7 percent growth]. We are aligned with how government policymakers see the situation,” Abola said.
First Metro president Jose Patricio Dumlao said the domestic economy would switch to the growth phase towards the end of the year, rebounding from a 9.6-percent contraction last year, the worst since World War 2.
“Although early signs of recovery at the onset of 2021 were halted due to the surge of COVID-19 cases and subsequent lockdown of NCR Plus in March, our economy remained resilient,” Dumlao said.
“The country has maintained its credit ratings and we continue to have a strong and healthy banking system, ample foreign reserves and adequate fiscal stamina. And now, we are seeing our economy switching from resilience to growth,” Dumlao said.
Dumlao said the faster global economic recovery, accelerated vaccine mobilization, sustained supportive fiscal and monetary policies and the government’s commitment to push infrastructure projects were expected to fuel growth.
The infrastructure spending program of the government, with its high multiplier effect, will be one of the main drivers of growth, he said.
“Our dependable and resilient OFW remittances, which grew 13 percent year-on-year in April this year, and BPO services are anticipated to perform even better. As employment starts to pick-up and more people get inoculated, consumer confidence is also expected to improve. The upcoming election next year is likewise anticipated to support growth,” Dumlao said.
FMIC and UA&P expect inflation to remain elevated at 4.2 percent in 2021 even if food prices adjusted downward. The upward movement is due to high crude oil prices and supply chain bottlenecks.
They also see the peso depreciating slightly because of the stronger demand for imports. It is projected to trade within 49 to 50 to a dollar.
“We are seeing a lot of positive signs and reasons to believe that the country is on its way to recovery but it is not to say that we should let our guards down. Still, the biggest risk to our outlook is the uncertain course of the pandemic. We should continue to be cautious and mindful and do our share in controlling the spread of the virus,” Dumlao said.
Dumlao said the recent rating outlook downgrade by Fitch Ratings to negative from stable for the Philippines should be looked at constructively.
“It is more of a reminder that economic recovery requires hard work rather than a negative warning. It is a useful heads up too about the many pitfalls that line up the path to growth and the myriad of the country’s existing economic strengths to overcome these,” Dumlao said.
