Economic managers said Tuesday they expect the economy to be fully reopened soon based on the increasing pace of the COVID vaccination program to curb the spread of the disease.
Finance Secretary Carlos Dominguez III, speaking during the mid-year virtual economic forum organized by the Economic Journalists Association of the Philippines, said while the Philippines may be behind other regional economies at this time in recovering from the malaise of the global pandemic, “the country’s recovery will be stronger on the back of its sound economic fundamentals.”
Dominguez said his optimistic forecast was anchored on the structural and tax reforms implemented under the current administration. ”We might appear to be behind our neighbors for now, but our recovery will be stronger because of our sound fundamentals,” Dominguez said in a presentation.
He said the COVID-19 vaccination program, which “has been rolling out quite well .... gives us hope that we can now fully reopen our economy.”
As head of the economic team, Dominguez said the country did not suffer the kind of fiscal downturn that typically accompanied an economic crisis even with the massive expenditures that the government incurred as a result of the global economic and health crises.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno said in the same forum that given the country’s solid macroeconomic fundamentals and barring yet-unforeseen growth speed bumps, the Philippines has the essential elements to rebound this year.
“Without seasonality, the country has been posting positive quarter-on-quarter positive growth since the third quarter of 2020. This improvement is expected to continue in the succeeding quarters of 2021 with more massive roll-out of COVID-19 vaccines,” said Diokno.
“This improvement is expected to continue in the succeeding quarters of 2021 with a more massive roll-out of Covid-19 vaccines,” Diokno said.
Diokno warned that there was still a high level of uncertainty, both domestic and abroad and the government needed to be more strategic in addressing possible resurgence in cases and in expediting vaccination.
“We have to be ready for the possible spillover risks resulting from differentiated and divergent recoveries,” Diokno said.
He said the country’s expected recovery in 2021 would be supported by improving economic indicators. He cited the smaller GDP contraction of 4.2 in the first quarter 2021, the improving business and consumer outlooks in the next six and 12 months, manageable inflation environment that allows the BSP to keep the record-low interest rates at 2 percent and the country’s strong external position.
Gross international reserves stood at $107.7 billion as of end-April 2021, equivalent to a year’s worth of import cover. He said the external debt to GDP ratio increased to 27.2 percent in 2020 because of pandemic-related financing but remained at a prudent level.With James Paul Gomez and Mary Beatrice L. Umlas
Meanwhile, cash remittances remained resilient; business process outsourcing earnings were robust; the banking system remained strong and the peso was still one of the strongest currencies in the region.
Credit rating agencies Moodys Investor Service, Fitch Ratings and S&P also retained their investment-grade ratings of the Philippines despite the pandemic, a vote of confidence to the ability of the country to bounce back strongly, he said.
Diokno said inflation rate was also expected to decline in 2022 based on a survey involving analysts. “Analysts expect inflation to remain elevated in 2021, but to fall within the target range in 2022,” Diokno said.
Economic Planning Secretary Karl Kendrick Chua said the GDP was expected to return to its pre-pandemic level—averaging over 6 percent annually---by the latter part of 2022.
Chua cited the factors that would act as the enablers of economic recovery. These are the reopening of the economy to MGCQ or better at the appropriate time, and expanding the age group allowed to go out, all with safeguards. Next would be the timely implementation of the recovery package, such as the 2021 budget and Bayanihan 2 Extension, and other reforms. Lastly would be the timely implementation of the vaccination program, he said.
Chua said better GDP numbers may be expected in the second quarter compared to the 4.2-percent decline in the first quarter. “Despite the ECQ or modified ECQ in the last three months, more people are going to work. In terms of mobility, we are just 25 percent down from the normal period, compared to last year when we were around 50 to 80 percent down. This shows the kind of recovery that we are expecting in the second quarter,” Chua said.
The economy contracted by 9.6 percent last year, the worst since the end of World War 2. Economic managers predicted a 6 percent to 7 percent expansion this year. With James Paul Gomez and Mary Beatrice L. Umlas