No thanks to the government’s failure to contain the COVID-19 crisis, the country’s economic recovery will be the most sluggish in Asia and its output may have to wait till 2024 before regaining its prepandemic potential, according to the London-based think tank Capital Economics.“A failure to contain the virus and lackluster fiscal support means that the Philippines will experience the slowest recovery in the region,” Capital Economics said in its emerging Asia economic outlook report for the second quarter of 2021.
Capital Economics slashed its full-year gross domestic product (GDP) growth projection for the Philippines to 7.5 percent to 8 percent from an earlier, more bullish outlook of 9.5 percent.
Cost of ECQ, MECQ
The think tank’s updated forecast remained above the government’s conservative 6.5 percent to 7.5 percent growth target for the year, although coming from a record GDP drop of 9.6 percent last year—the Philippines’ worst postwar recession, hence a low base.“The economic recovery slowed significantly in the first quarter and is set to go into reverse this quarter. A surge in new COVID-19 cases has forced the government to impose stringent containment measures in the capital and outlying regions. Mobility data point to a sharp fall in activity,” the think tank added.
Capital Economics was referring to the two-week revert to the strictest enhanced community quarantine (ECQ) before March ended, and then the lesser modified enhanced community quarantine (MECQ) until the end of April.These stricter lockdowns were imposed in Metro Manila as well as the provinces of Bulacan, Cavite, Laguna and Rizal—lumped together as “National Capital Region (NCR) Plus,” which accounted for half of the Philippines’ GDP.
Jab drive ‘disappointing’
“A successful vaccination rollout would be a game changer. But progress so far has been disappointing—just 1 percent of the population have been inoculated. The slow rollout raises doubts about the government’s ability to meet its target of inoculating 60 percent of the population this year,” Capital Economics said. The government targets to vaccinate all 70 million adult Filipinos above the age of 18 by yearend to achieve herd immunity.
“Lasting damage from the pandemic is likely to be greatest in the Philippines. Failure to suppress infections has required restrictions to remain in place for longer than elsewhere in the region. And fiscal support has been inadequate. COVID-19 will leave a legacy of job losses, higher debt and an impaired banking system,” Capital Economics added.
The unemployment rate stood at a 16-year high of 8.8 percent as of February, equivalent to 4.2 million jobless Filipinos.It does not help that with the national elections in 2022 coming up, “political uncertainty will drag on prospects in the Philippines,” Capital Economics added.