Alert Level 3 in NCR seen to have 'minor' effect on economic growth

Jessica Fenol and Raine Musngi, ABS-CBN News

Posted at Jan 04 2022 11:06 AM | Updated as of Jan 04 2022 12:22 PM

Scores of people shop at the Phase 1 market in Bagong Silang, Caloocan on Dec. 31, 2021, New Year’s eve. Jonathan Cellona, ABS-CBN news/File
Scores of people shop at the Phase 1 market in Bagong Silang, Caloocan on Dec. 31, 2021, New Year’s eve. Jonathan Cellona, ABS-CBN news/File

MANILA - The recent reimposition of the stricter COVID-19 Alert Level 3 in Metro Manila could have "minor" impact on the economy even as the Trade Department is estimating a P200 million loss, an economist said Tuesday.

The National Capital Region was placed under the said alert status from Monday until Jan. 15 after the number of new COVID-19 cases increased significantly amid the potential community transmission of the omicron variant.

The tighter restrictions in the capital region could cut the 6 to 7 percent potential economic growth this year by only .1 to .2 percent, UA&P Director of Strategic Business Economic Program Vic Abola told ANC. 

"In terms of overall effect in the economy, I think it will be a minor reduction. I’m looking at .1 percent to .2 percent. What is more significant really is the typhoon that hit the south," he said. 

Metro Manila, home to around 13.5 million people, accounts for about a third of the national economy.

This year, the government expects the economy to expand by 7 to 9 percent, while the Asian Development Bank and the World Bank have set their forecast to 6 percent and 5.8 percent, respectively.

The economy could revert to its pre-pandemic level in the fourth quarter, Abola said, in line with the projection of Socioeconomic Planning Secretary Karl Kendrick Chua. 

The country's debt-to-GDP ratio also remains low compared to its peers, with the government's debt paying capacity buoyed by dollar remittances from overseas Filipino workers (OFW) and the Business Process Outsourcing (BPO) sector, Abola said. 

Meanwhile, inflation, which is hovering above the government target, could be back within the 2 to 4 percent range "sooner" than expected. 

The Bangko Sentral ng Pilipinas (BSP) earlier said the consumer price index could settle within the target band by the middle of the year.

But with elevated price pressures, the BSP is also widely expected to start tightening monetary policy after holding off on interest rate hike for the entire 2021. 

Fitch Solutions earlier said the BSP could implement a staggered interest rate hike of about 75-basis points, which could bring the benchmark borrowing rate to 2.75 percent. 

The country's interest rate is at its record low of 2 percent. 

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