Economist: PH output back to pre-pandemic levels by 2022

MANILA – The Philippines’ pre-pandemic level expansion is seen to return by 2022, an economist said, noting that the government’s 2021 spending on infrastructure, among others, is key to economic recovery.

In a virtual briefing Friday, Chidu Narayanan, Standard Chartered Bank economist for Asia, forecast domestic growth to recover to about 6.1 percent this year from a projected -8.9 percent output last year.

Narayanan forecast 2022 growth, as measured by gross domestic product (GDP), to be about 6.5 percent.

He also projected growth in the last quarter of 2020 to be about -6.1 percent, better than the -11.5 percent in the third quarter of last year.

The GDP in the first three quarters of last year contracted by 10 percent.

Economic managers have forecast a GDP of between -8.5 percent and -9.5 percent for 2020.

Consumption is also not expected to be back to pre-pandemic levels this year due to the slack in the labor market, which has been affected by the pandemic.

Narayanan said consumption is expected to return to pre-pandemic levels once the job situation has normalized and intervention to address the rise in coronavirus disease 2019 (Covid-19) infections has improved.

“For investments to come back and for employment to come back, we’ll need infrastructure investment to pick up quite a bit of the slack in 2019 and 2020. These two are the fairly important prerequisites for consumption to come back as well,” he said.

In terms of Bangko Sentral ng Pilipinas’ (BSP) contribution to cushion the economic impact of the pandemic, Narayanan discounted aggressive policy measures this year, unlike last year when monetary officials slashed the central bank’s key policy rates by 200 basis points.

He said a cut in banks’ reserve requirement ratio (RRR) is more likely to encourage more banks to lend.

Narayanan forecast a 100 basis points reduction in banks’ RRR in the second half this year, “given that liquidity is very, very flush at this point in time.”

Last year, the BSP slashed banks’ RRR by 200 basis points.