ASIA-PACIFIC economies including the Philippines will experience a sluggish recovery in “contact-intensive” industries due to the continued surge in coronavirus infections, according to the International Monetary Fund (IMF).
“Growth in the ASEAN economies has been marked down to 4.5% given still high COVID-19 caseloads in Indonesia, Malaysia, and the Philippines, which will slow the pace of normalization in contact-intensive sectors,” Jonathan Ostry, acting director of the IMF Asia and Pacific Department, said in a statement Tuesday.
The IMF in its World Economic Outlook released on April 6 revised the Philippine growth outlook to 6.9% from the 6.6% it forecast in January, but said the higher estimate is mainly due to base effects from the record 9.6% contraction in 2020 which was the worst in Southeast Asia.
“A region (Asia Pacific) known for its trademark growth-with-equity model now runs the risk of entrenching excessive inequality. If policymakers do not act, they risk stunted opportunities, fragile growth, and even social unrest,” Mr. Ostry said.
Separately, Nomura Global Markets said in a report that the Philippines has spent the least on economic recovery measures, which could slow its rebound and hurt vulnerable groups.
Nomura Global analysts Euben Paracuelles and Rangga Cipta said the economy is only likely to return to its pre-pandemic levels by the third quarter next year, turning more pessimistic after a previous estimate that such output will be achieved by the second quarter of 2022. They expect the economy to grow by 5.4% this year from 6.4% previously forecast.
“The economy’s starting position remains fragile, with the pace of recovery still weak and the unemployment rate rising again, even before the lockdowns,” it said.
The analysts also expressed concern over the delays in sealing vaccine orders and the speed of inoculation.
“This suggests the country could continue to struggle to get the pandemic under control and leaves it vulnerable to bouts of recurring outbreaks throughout the year.”
“Regarding vaccine procurement, we think the government’s less proactive approach than some of its peers, such as Indonesia, suggests the country will likely fall further behind in acquiring more vaccines amid increasingly limited global supply and emerging constraints along supply chains and deliveries,” they said.
They also noted the small fiscal packages implemented by the Philippines, which they said were the smallest in the region in 2020 and 2021.
“Limited fiscal support, in our view, runs the risk of bigger scarring effects via more job losses and/or small-, medium-sized enterprises facing insolvency issues,” they added.
The report noted that the monthly subsidy for low-income households amounts to only P23 billion or 0.1% of gross domestic product, adding that this does not even involve new money as unused portions of previous stimulus packages were tapped. — Luz Wendy T. Noble