"The first signs of recovery still are not visible, and they appear unlikely to be visible anytime soon."
"The first signs of recovery still are not visible, and they appear unlikely to be visible anytime soon."
Until the beginning of this year the international financial institutions and some economists and securities analysts were forecasting that the Philippine economy would grow by 6 percent or more in 2021. They believed that the worst of the pandemic had passed and that the gradual recovery of an economy repressed by the world’s longest lockdown was at last under way.
Then came the shocker. Two weeks ago PSA (the Philippine Statistics Authority) announced that this country’s annual GDP (gross domestic product) contracted, between January and March for the fifth consecutive quarter. Not only did the economy contract; it contracted by a stunning 4.2 percent. This meant that the economy had been in recession for four quarters —its worst performance since the early 1980s.
I haven’t seen new Philippine-GDP projections emanating from the institutions and individuals who had been very sanguine about this country’s near-term economic prospects. They have two options: They can make appropriate revisions to their precious forecasts, or they can stand by those forecasts.
The institutions and individuals who are inclined to stand by their previous forecast are bound to borrow the sports saying “It ain’t over till it’s over” and that the seven months that are left of 2021 is a time in which the Philippine economy can develop more steam and make up for the year’s sluggish start. They will argue that as 2021 goes on, the vaccine rollout will intensify and that as more FIlipinos get fully vaccinated, businesses will feel more confident about reopening their establishments and consumers will feel more confident about spending money.
They are bound, also, to point to the concept of pent-up demand and suggest that demand has been building up during the fourteen months of lockdown, which will be unleashed on the economy by consumers once the nation returns to almost-normal.
As things stand, sticking by previous sanguine forecasts of the Philippine economy’s 2021 performance is a highly risky thing to do. The month of May will be over before very long, but at this late date, the first signs of recovery still are not visible, and they appear unlikely to be visible anytime soon. The economy is still very much on “ayuda” mode, the preponderance of opinion is that the delay in the approval of the Bayanihan 3 Act has dealt a severe blow to the economy’s early recovery.
The biggest “if” factor of all is the speed and coverage of the vaccine rollout. Comparative data show that the Philippines has one of the slowest vaccine rollout speeds in ASEAN (Association of Southeast Asian Nations) There has been some improvement of late, but it doesn’t look like the number of fully vaccinated Filipinos will have risen, by late 2021, to a level sufficient to generate public confidence in living near-normally once more.
Standing by 6-percent-and-above forecasts of 2021, Philippine GDP growth would be a very courageous act in the face of the government’s below-par performance with regard to vaccine procurement and distribution. With only a comparatively small percentage of the nation’s adult and high-priority population fully vaccinated, the prospects for a near-full reopening of the economy are not bright. And the chances of a substantial improvement in those prospects anytime soon are not good.
The next two months are going to be critical for the Philippine economy’s 2021 growth rate. If the situation has not improved significantly by July, those forecasts of 6 percent or more GDP growth in 2021 can be kissed goodbye.
The authors of those forecasts should look realistically at the possibility that the Philippine economy will register modest—perhaps very modest—growth in 2021, like 3 percent to 4 percent.