PH economy in for a big comeback in 2021, Morgan Stanley bets

By: Ben O. de Vera, Philippine Daily Inquirer, 17 Nov 2020

Global financial giant Morgan Stanley is bullish about the Philippines’ strong econo­mic rebound next year against a backdrop of low inflation, the government’s infrastructure development push and the looming availability of vaccines against COVID-19.

In a report, Morgan Stanley hiked its 2021 gross domestic product (GDP) growth forecast for the Philippines to 13.5 percent from 13.1 percent previously—more bullish than the consensus average of 7.8 percent.

“The sharp rebound is coming: We expect the economy to recover to pre-COVID-19 levels by the first quarter of 2021, as the COVID-19 situation improves and vaccine availability nears. Moreover, policy stance should stay accommodative, as manageable inflation and the Fed’s [average inflation targeting] framework enable the [Bangko Sentral ng Pilipinas] to keep policy rate low and liquidity inflows help the Philippines to fund its fiscal deficit,” Morgan Stanley Research said in a Nov. 15 report titled “Goldilocks in the House.”

The investment bank said the country was also expected to ramp up its “Build, Build, Build” program to help spur recovery.

“Policymakers have pledged to prioritize and fast-track several big-ticket infrastructure projects with higher multiplier effect, given the unintended delays in construction activities in 2020 due to the COVID-19 lockdown and weather disruptions. With the 2021 budget being President Duterte’s penultimate budget before the next presidential election (May 2022), there is likely added impetus to accelerate infrastructure spending,” Morgan Stanley added.

The Philippines is the only emerging Asian country projected by Morgan Stanley to post double-digit GDP growth next year.

In 2022, the Philippines and India are expected to grow the fastest in the region, with 6-percent expansion.

The government targets 6.5 to 7.5 percent growth in 2021 and 2022 as the economy gradually recovers from the pandemic-induced recession.

From 2023 to 2025, Morgan Stanley projected annual economic growth to average 6.5 percent, the fastest in the region.

In a separate Nov. 15 report titled “2021 Global Macro Outlook: The Next Phase of the V,” Morgan Stanley also sees stable inflation in the Philippines during the medium term: 2.4 percent in 2020, 3 percent in 2021, 3.3 percent in 2022 and 3 percent in 2023-2025.

However, Morgan Stanley estimated the Philippines’ GDP to fall by a record 8.5 percent in 2020, less optimistic than the earlier forecast of 6.4-percent decline and the consensus of 8-percent drop.

As the Philippines was among the countries that trailed in COVID-19 containment in the region, its projected economic contraction this year was the biggest among the 10 Asian economies covered by the Morgan Stanley report, which included China, Hong Kong, India, Indonesia, Malaysia, Singapore, South Korea, Taiwan and Thailand.

But for the fourth quarter, Morgan Stanley expects GDP to shrink by a narrower 4.5 percent year-on-year compared to the record 16.9 percent in the second quarter and the worse-than-expected 11.5 percent during the third quarter.

Coming from a very low base this year, especially during the quarters badly hit by the longest and most stringent COVID-19 lockdown in the region, Morgan Stanley projected GDP to jump by 25.7 percent and 17 percent year-on-year, respectively, by the second and third quarters of next year. INQ