Banker sees economy returning to pre-covid growth level in 3 years
Security Bank’s Trust Asset Management Group is seeing the economy returning to pre-pandemic growth of 6 percent by 2023 as it expects consumption spending to bounce back.
Noel S. Reyes, the bank unit’s chief investment officer, said that the healthy amount of liquidity in the financial system is seen supporting the household spending.
According to data from the Philippine Statistics Authority, household expenditure fell by over 5 percent to P6.47 trillion in the first half from P6.84 trillion year-on-year as spending on alcoholic beverages, tobacco, clothing and transport, among others, declined.
“The good liquidity brought by the forceful response of the BSP [Bangko Sentral ng Pilipinas] and low interest rates put the country in a good position for consumption rebound,” Reyes explained.
The series of key policy rate trimming—totaling 175 basis points— has infused liquidity amounting to over P1 trillion into the economy. Meanwhile, the overnight reverse repurchase facility currently stands at 2.25 percent.
This year, however, the group said that the country’s gross domestic product (GDP) is expected to contract by 7.7 percent. The forecast was attributed to most Filipinos staying at home and limiting the purchases to essentials only.
“[For] Covid-19, it was the decline
consumption and business closures, because of lockdowns that bled into the financial system, which in return led us to negative Gdp-growth territory,” Reyes said.
The Philippine economy has entered a recession after declining in two consecutive quarters as businesses struggle to operate amid the lockdown measures due to the coronavirus pandemic.
Security Bank said it anticipates a 3.5-percent year-on-year growth in 2021 due to base effect.
Early this month, former Socioeconomic Planning Secretary Solita Monsod noted in a presentation at the General Membership Meeting of the Chamber of Thrift Banks, that “given the state of things, any hope of recovery would likely come in 2021 but mainly due to base effects.”
Meanwhile, Security Bank President and CEO Sanjiv Vohra said that once a vaccine or cure for the coronavirus has been found, the consumer confidence is seen improving as well.
“It’s a delicate balancing act for sure, and the key will be to strengthen our public health so that we make sure that our work force and thereby our economy will remain productive, and business and consumer confidence returns,” he said.
“Locally, we have low-interest rates and good liquidity. We also have a forceful BSP response, resilient currency, and a strong potential for economic and consumption rebound,” Vohra added.