INTERNATIONAL think tank Fitch Solutions raised its growth outlook of the Philippines for this year, as Covid-19 cases drop and economic activity starts to normalize in the country.
In a statement on Wednesday, the research arm of the Fitch group said it now expects the country to post a gross domestic product (GDP) output of 4.5 percent, up from the 4.2 percent earlier expected.
“A gradual relaxing of domestic mobility restrictions and continued support measures from policy-makers helped propel activity, bringing the economy closer to its pre-pandemic output levels,” Fitch Solutions said.
“There are signs of a continued recovery in the fourth quarter of 2021, with mobility data signaling an increase in domestic activity and vaccination rates rising in the key economic hub of Manila,”
Fitch added. The Philippine Statistics Authority (PSA) earlier reported that the country grew 7.1 percent in the third quarter of the year, surpassing market expectations.
Fitch Solutions said they expect private consumption to grow by 3.7 percent in 2021, revised upward from the earlier expectation of 3.5 percent. The think tank said recovery in private consumption is key to the Philippines’s real GDP growth, given the fact that private consumption accounts for around 74 percent of output.
“The easing of domestic restrictions in the fourth quarter of the year, particularly around Metro Manila, will help bolster private consumption. Google mobility data are already reflecting a strong rebound in domestic activity, with data for retail and recreation, and grocery and pharmacy mobility signaling the highest level of activity since the onset of the pandemic in the second quarter of 2020. This tallies with the recovery in the retail index, which in October rose to its highest level since July,” Fitch Solutions said.
For next year, the research firm revised its growth outlook of the country from 6.8 percent to 6.5 percent. “While we expect economic growth to increase further in 2022, remaining challenges will stop the Philippine economy returning to its prepandemic growth trajectory,” the research firm said.
Proceed with caution
Although Fitch Solutions turned more optimistic for the year, the think tank still warned of lingering risks heading into next year.
“The Philippines still remains vulnerable to Covid-19 outbreaks given disparities between regional vaccination rollouts and the lower efficacy rates of the vaccines administered. As of October 21, only 22.6 percent of the population had been fully vaccinated and the lower efficacy of the vaccines being used could mean that there is a greater need for booster shots,” Fitch Solutions said.
“In the near term, further disruptions could weigh on the pace of the economic recovery, and the prospects of a revival in the country’s tourism sector remain dim,” it added.