THE fragile recovery of the Philippine economy continues to make its prepandemic growth trend elusive, according to the Asian Development Bank (ADB).
In its Asian Development Outlook Update (ADOU), the Manila-based multilateral development bank maintained its growth and inflation expectations for the Philippines.
However, based on ADB data, the Philippines’s GDP growth remains 14.9 percent below its prepandemic growth trend, the lowest among Southeast Asian countries. The average growth in Southeast Asia is still 8.6 percent below its prepandemic trend.
“The forecast is not that GDP will be 8.6 percent below prepandemic levels; rather, GDP was growing along a trend line, and then Covid-19 happened. While economies continue to grow, they are still below that prepandemic trend,” Abdul Abiad, director of Macroeconomics Research at ADB’s Economic Research and Regional Cooperation Department told the BusinessMirror in an email.
Other Southeast Asian countries also posted growth rates that are below their prepandemic growth trend. Data showed Cambodia’s growth is still 12.1 percent below its prepandemic GDP growth; Thailand, 11.1 percent; Lao PDR at 9.1 percent.
Malaysia is also seeing growth that is 7.7 percent lower than its prepandemic growth; Indonesia, 6.6 percent; Singapore, 4.4 percent; and Vietnam, 3.9 percent.
Only Timor-Leste and Brunei Darussalam are growing above their prepandemic growth by 2.3 percent and 2.8 percent, respectively.
Growth, inflation projections
MEANWHILE, ADB said it maintained its projection for the country’s GDP growth at 4.5 percent in 2021 and 5.5 percent in 2022.
The bank’s inflation outlook for the country was also maintained at 4.1 percent this year and 3.5 percent next year.
“The main risk to the outlook is the spread of more contagious Covid-19 variants, leading to the reimposition of strict quarantines and stalling economic recovery,” the ADOU stated.
ADB noted that the country’s daily Covid-19 cases have been spiking since July 2021 due to highly transmissible new variants.
The report noted that from less than 6,000 daily infections in May and June, cases had risen to over 18,000 a day by early September, with total cases reaching 2.2 million.
On Monday, the Department of Health (DOH) declared that the Delta variant is now the dominant virus strain in the Philippines. (See: https://businessmirror.com.ph/2021/ 09/20/its-official-delta-is-now-dominant-virus-strain-in-phl/)
In order to respond, the ADB noted that the government has adopted a new quarantine scheme using 5 alert levels. This was piloted in Metro Manila this month.
The government earlier said the new scheme will be better than the current community quarantine classification system, wherein there are still Authorized Persons Outside of Residence (APOR). (See story here: https://businessmirror.com.ph/2021/08/26/dilg-granular-lockdowns-to-replace-quarantine-restrictions/)
Under the community quarantine classification system, an area is placed under enhanced community quarantine (ECQ), modified ECQ (MECQ), general community quarantine (GCQ), and modified GCQ, depending on several factors, which include health-care utilization rate and daily attack rate.
“It specifies the businesses and establishments that will be allowed to operate at certain capacity rates and gives mobility guidelines, including activities open for vaccinated individuals,” ADB explained.
The ADB also considered the national government’s efforts in continuing its public infrastructure spending, improving consumer confidence, and progress in the national Covid-19 vaccination program.
Public infrastructure disbursements rose 39.1 percent year-on-year in July, and the government is on track to achieve its target of raising infrastructure spending to at least 5 percent of GDP in 2021 and 2022, up from 4.8 percent in 2020.
The government has focused on vaccinating Filipinos living in main urban areas such as Metro Manila, which records the highest incidences of Covid-19 cases.
As of September 15, 2021, ADB said 84 percent of Metro Manila residents aged 18 and older, or 8.2 million people, have received at least one dose of a Covid-19 vaccine, and 63 percent have been fully vaccinated.
Overall, ADB said as of mid-September, 22 million people nationwide had received a first jab and 17.7 million were fully vaccinated.
“The economy has regained its footing and is on the right growth path. But the recovery remains fragile due to the threat posed by more infectious Covid-19 variants,” said ADB Philippines Country Director Kelly Bird.
“Vaccination remains key to the economy’s safe reopening. We are actively supporting the government’s efforts to achieve its national vaccination targets through our health-related assistance,” Bird said.
ADB forecasts growth of 7.1 percent this year, according to an update of its flagship economic publication, Asian Development Outlook (ADO) Update 2021.
That compares with a projection of 7.3 percent in April. The growth outlook for 2022 is raised to 5.4 percent from 5.3 percent.
ADB said new Covid-19 variants, renewed local outbreaks, the reinstatement of various levels of restrictions and lockdowns, and slow and uneven vaccine rollouts are weighing down the region’s prospects.
Covid-19 cases in developing Asia have risen since the Delta variant of the virus emerged in April. New daily cases peaked at 430,000 in May. More than 163,000 new daily cases were recorded on August 31.
Meanwhile, vaccination progress in developing Asia remains uneven and lags behind that of advanced economies.
As of August 31, 2021, 28.7 percent of the region’s population had full vaccine protection, compared with 51.8-percent coverage in the United States and 58 percent in the European Union.