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MANILA - The Philippine economy is likely to settle on a "lower growth path" of 4 to 4.2 percent in the years after 2021, slower than the 6 percent average growth of gross domestic product (GDP) pre-coronavirus, an economist said Thursday.
Nicholas Mapa, a senior economist at ING Bank, said this is due to the slower pick-up of economic drivers that propelled the Philippine economy before COVID-19.
"The main driver was household consumption, delivering 70 percent of economic activity. It was an organic growth story. Households are consuming, then income started accelerating very quickly, that quickly moved into a capital formation or investment renaissance. Then finally, government spending kicked in," Mapa explained during an interview with ANC's Market Edge.
"Capital formation and household consumption are down and bruised right now. It's time for government spending to step up and support the economy," he added.
Mapa said the Philippines is viewing the fight against COVID-19 as a "marathon", but it may also take cues from other countries that have a lot of impetus to get out of their vulnerable situation and view the race as a "sprint".
He said that consumer and business sentiment improved to "less pessimistic, but still negative", noting that sentiment is important for the people and businesses to start buying again to push the economy forward.
"We are in conservation mode, both household, and firms...Right now, we're firefighting, living day to day. And this is reflected in our spending," Mapa said.
"But first, people need to have jobs again. You can't be confident to consume when you don't have a source of income. Unemployment numbers have improved, but it's still far from pre-pandemic levels of about 5.2 percent," he added.
The country's unemployment rate averaged 10.4 percent in 2020 which translates to around 4.5 million unemployed persons.
The ING Bank economist said their forecast is according to the government's estimates to reach full vaccination or herd immunity in a span of two years.
With the new COVID variant, Mapa noted the Philippines may be "set back another two years in nominal GDP".
"I think the government and authorities need to double down and step up their efforts to get a hold of the virus. From there, we can hope consumers can be confident to step out from their homes," he said.
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