Less bumpy road ahead for Phl – think tank

The Philippines is unlikely to face more speed bumps on the road to the new normal, significantly helping in the continued pickup of economic recovery.

In a report, UK-based think tank Pantheon Macroeconomics upgraded its gross domestic product (GDP) growth forecast for the Philippines to 5.5 percent from the earlier four percent for full year 2021.

This comes after the government reported a stronger than expected GDP pace of 7.1 percent in the third quarter.

Pantheon senior Asia economist Miguel Chanco said the Philippines’ return to normalcy still has room to run compared to its counterparts in the region.

He noted that retail and recreational customers remain below pre-pandemic levels at 88 percent.

Chanco said Filipino customers continue to exhibit a higher than average degree of cautiousness, as shown in the still wide gap between essential and non-essential travel.

“The good news is that the road to normality is unlikely to face more COVID speed bumps,” Chanco said.

Average daily cases in the country have dropped to their lowest levels in months, registering at fewer than 2,000 per day.

“Adding this to the 32 percent of the country who are now fully vaccinated gives us confidence that the substantial decline in new cases since mid-September is sustainable,” he said.

For the third quarter, Chanco said the rebound in private consumption at seven percent was impressive, especially as the government reimposed lockdown measures in August.

Despite the lockdown, mobility data showed that trips to retail and recreation venues significantly improved in the third quarter.

However, Chanco still warned that the strong bounce-back in consumption would likely come at the expense of the speed of a longerterm recovery.

He said the rebuilding of rainy day funds or the money to be used for unplanned financial expenses will continue to weigh on spending decisions in the coming year, at least.

Similarly, Chanco argued that government spending, which returned to expansion during the quarter, may be unsustainable.

“History shows clearly that public expenditure loses momentum in the run-up to a general election, before declining outright during the quarter when the vote is held,” Chanco said.

“Second, the authorities will have much more work to do next year to get the fiscal house in order, compared with their counterparts in the region. Indeed, the government’s infrastructure drive already looks to have hit a ceiling, amid its strained financial position,” he said.