PH is unlikely to meet 2021 economic targets
The extended COVID-19 quarantine and slow mass vaccination are hurting domestic consumption and production, so think tank Moody’s Analytics sees the Philippines underperforming the region on the path to economic recovery.
In a report released Monday, Moody’s Analytics economists Katrina Ell and Dave Chia said they expected gross domestic product (GDP) growth of just 5.3 percent this year, below the government reduction target of 6 to 7%.
“The Philippines is not expected to return to pre-pandemic production levels until the end of 2022. In contrast, China, Taiwan, South Korea and Vietnam have returned to previous production levels, while Indonesia and Thailand are set to return this year. This makes the Philippines clearly the laggard in Asia, ”they said.
Moody’s Analytics mainly blamed the Philippines’ failure to curb the spread of COVID-19, and it didn’t help that the national mass inoculation program was slow.
“One factor contributing to the Philippines’ inability to control local infections in the first few months came from the decentralization of the health system. The leaders of towns and villages are responsible for the health system rather than the central government. As a result, there were no consistent and stringent policies regarding contact tracing, funding and quarantine measures for those infected and their close contacts, ”he noted.
“The Philippines also has a high percentage of positive COVID-19 test results, implying that a relatively high degree of cases go undetected,” he added.
Moody’s Analytics said the Philippines was lagging behind most of its neighbors on immunization due to previous problems getting sufficient doses of COVID-19, although “the problem has eased somewhat with the government increasing recently its sources ”.
“Only 2.7 percent of the country’s 108 million people have received a dose of the vaccine, while only 0.8 percent are fully immunized. This is problematic, as it means the Philippines remains vulnerable to persistent local infection spikes, inhibiting economic recovery as it is assumed that the government will reintroduce strict lockdowns to contain further infections, ”Moody’s Analytics said, citing immunization data from last week.
“In addition, there is a reluctance towards vaccines in the Philippines due to misinformation and persistent scarring from the 2016 dengue vaccine that puts children’s health at risk,” he said, referring to the Dengvaxia controversy.
More than its impact on economic growth, the protracted fight against COVID-19 is hurting the livelihoods of millions of poor Filipinos, Moody’s Analytics said.
“The slow economic recovery coupled with relatively tough foreclosure measures has increased inequality. Those in higher paying jobs tend to be office workers, and they were able to switch to working from home, while low income workers did not have that option. The unemployment rate increased accordingly, especially in the low income segment. “
While unemployment fell as the economy gradually reopened, the unemployment rate of 7.1% in March remained the highest in emerging Asia.
In another report, the World Bank said that “in Indonesia and the Philippines, two large regional economies that have not been able to control the disease, demand and supply factors have weighed on growth. ‘, Especially in industrial production last year.
“At the end of 2020, industrial production in the Philippines remained about 3% below its January 2020 level,” said World Bank economists Ergys Islamaj, Franz Ulrich Ruch and Eka Vashakmadze in their report titled “Dynamics of supply and demand in East Asia during the COVID-19 recession. “
As such, the World Bank noted that retail sales have slowed in the Philippines, mainly due to supply shocks caused by the region’s most stringent COVID-19 quarantine.
In the East Asia and Pacific region, economies are expected to face sluggish demand this year, with the output gap considered largest in the Philippines.
“The large shocks induced by a pandemic in Malaysia, Thailand and the Philippines resulted in large negative output gaps, exceeding 5 percent of potential output for 2020. For all of these economies [including Indonesia and Vietnam], output gaps are now several times larger than during the global financial crisis, ”the World Bank said.
“The output gaps in the economies of the region are expected to remain negative in 2021, which suggests a lack of demand… In the rest of the region, output gaps are estimated at around 3% in 2021, ranging from 2.8% in Indonesia to 5.9% of production potential in the Philippines, ”he added.
The World Bank expects Bangko Sentral ng Pilipinas to do most of the economic rebound – “given the low core inflation expected over the next two years, monetary policy may support demand, especially in economies hardest hit by the epidemic ”. like the Philippines.
“Additional measures may be needed in economies whose production has been hit hardest by the pandemic [like the Philippines] to ensure that viable businesses do not fail in turning a liquidity crisis into an insolvency crisis, ”according to the World Bank. INQ
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