‘Lockdowns to keep growth to 5% max’
QUARANTINE restrictions and the weak recovery of the economy in the second quarter would allow the economy to post a maximum GDP growth of 5 percent this year, according to a local think tank.
In its latest Market Call report, First Metro Investment Corporation-university of Asia and the Pacific (FMIC-UA&P) Capital Markets Research said growth this year, at best, could reach 5 percent or lower by year-end.
The think tank said the 11.6-percent GDP growth in the second quarter brought some optimism but, on a quarterly basis, growth still contracted at 1.4 percent.
“Overall, our outlook for the full year GDP growth has brightened with the Q2 data coming at the higher end of market expectations. However, the caveats are when one looks at seasonally adjusted QOQ [quarter on quarter] data, GDP slipped by -1.4 percent, and the extent of the impact of the new lockdowns. These lead us to think that the low side of—or slightly below—our 5 percent to 6 percent full-year projection would land us in the safe zone,” the think tank said.
With the rise in Covid-19 cases due to the new variants circulating in the Philippines, FMIC-UA&P Capital Markets Research said economic gains in recent months could be diminished.
These gains include job generation in June when 361,000 new jobs were created. When employment declines, so does income, which could lead to lower consumption, the economy’s primary growth driver.
Further, the think tank said, the Manufacturing sector expanded by triple-digits for the second month in June 2021.
Based on the Monthly Integrated Survey of Selected Industries (MISSI), the Volume of Production Index (VOPI) surged 453.1 percent in June while the Value of Production Index (VAPI) grew 439.6 percent.
The think tank added that exports have already exceeded January and February 2020 levels while capital goods imports continued to rise.
Exports grew 17.6 percent in June while imports increased 34.2 percent. This is the fourth consecutive month of double-digit growth for exports and imports this year.
“The rise in Covid cases due to the new variants, however, may still upend high hopes,” FMIC-UA&P Capital Markets Research said.
The tempered growth outlook of the think tank is consistent with the government’s revised economic outlook.
Based on data shared by the National Economic and Development Authority (Neda) last week, economic growth is expected to settle at 4 to 5 percent this year before reaching 7- to 9-percent growth next year and 6 to 7 percent in 2023.
“Prospects for 2021 remain encouraging and will allow us to recover to pre-pandemic levels by the end of 2022. This will prevent long-term scarring and productivity losses,” Socioeconomic Planning Secretary Karl Kendrick T. Chua earlier said in a presentation.
Chua noted that the recovery next year would likely be driven by the acceleration of the vaccination program and the safe reopening of the economy, while strictly adhering to health protocols.
He added that the full implementation of the recovery package which includes the 2021 budget, Corporate Recovery and Tax Incentive for Enterprises Act, and Financial Institutions Strategic Transfer Financial Institutions Strategic Transfer (FIST) law, could help boost growth.