by Louise Maureen Simeon – The Philippine Star, 23 Sep 2021
MANILA, Philippines — The Asian Development Bank (ADB) has retained its 2021 economic growth outlook for the Philippines at 4.5 percent, but warned of continued downside risks from more transmissible COVID variants that may lead to fresh spikes in cases and lockdown measures.
In its Asian Development Outlook 2021 Update released yesterday, the Manila-based multilateral lender said it is sticking to its gross domestic product (GDP) forecast for the Philippines at 4.5 percent and 5.5 percent for 2021 and 2022, respectively.
In contrast, its GDP outlook for Southeast Asia has been slashed to 3.1 percent from four percent in July and 4.4 percent in its original outlook in April amid the Delta variant that slowed the region’s growth momentum.
ADB’s forecast now falls within the government’s revised GDP growth target of four to five percent for the whole year. The economy is coming off a 9.6 percent contraction last year.
In Southeast Asia, ADB gave a sea of downgrades across nine countries. It maintained forecasts for the Philippines while it hiked growth for Singapore.
Based on ADB’s projections, the Philippines is poised to register the third highest growth in the region, next to Singapore’s 6.5 percent and Malaysia’s 4.7 percent.
In a briefing, ADB Macroeconomics Research Division director Abdul Abiad said the huge economic contraction for the Philippines last year would allow a stronger bounce-back in 2021.
“There’s been a focus on ensuring more rapid progress in vaccination in Metro Manila, which accounts for about 40 percent of GDP. Good vaccination in the capital allows more reopening and normalization that can help spur activity,” Abiad said.
“Also, the government is still planning to continue its infrastructure investment program. And that’s also going to support growth,” he said.
While the economy is recovering, ADB said this remains fragile because of periodically tighter COVID-19 mobility restrictions, particularly in Metro Manila.
Further, the multilateral lender emphasized that the main risk to the outlook is the spread of newer, more contagious variants, which may result in the return of stricter containment measures and stall economic activity.
ADB country director Kelly Bird said the Philippine economy has regained its footing and is on the right growth path, and vaccination remains key to the economy’s safe reopening.
ADB is also banking on improved consumer confidence and rising remittances from workers overseas to support a continued recovery in household consumption.
Employment in the country is also seen recovering gradually with the implementation of granular lockdowns in areas with high cases, with widespread vaccination allowing restrictions to be eased further and for more businesses to operate.
ADB also took note of the government’s focus on vaccinating Filipinos living in main urban areas such as Metro Manila, where the highest incidence of COVID cases is recorded.
In the capital, more than 60 percent have already been fully vaccinated. For the whole country, 17 percent received two doses.
Further, ADB kept its 2021 inflation forecast at 4.1 percent, the same level as the Bangko Sentral ng Pilipinas’ target for the year. For the January to August period, inflation has already averaged at 4.4 percent.
Its forecast took into consideration the continued impact of the government’s supply-side measures to contain food prices.
“With inflation expected to fall within the central bank’s target range for the rest of the year, and domestic demand recovering only gradually, the monetary stance will likely remain accommodative,” ADB said.
Meanwhile, ADB lowered its economic growth projection at 7.1 percent from 7.3 percent in April for the whole of developing Asia due to renewed virus outbreaks and uneven progress on vaccinations.
“Developing Asia remains vulnerable to the COVID-19 pandemic, as new variants spark outbreaks, leading to renewed restrictions on mobility in some economies,” ADB acting chief economist Joseph Zveglich said.
“Policy measures should not only focus on containment and vaccination, but also on continuing support to firms and households and reorienting sectors in the economy to adapt to a new normal once the pandemic subsides, to kickstart the recovery,” he said.