Analysts hopeful omicron surge in PH ends as quickly as it escalates

Warren de Guzman, ABS-CBN News

Posted at Jan 15 2022 02:02 AM

Members of the Land Transport Office and the Inter-Agency Council for Traffic (I-ACT) inspect public utility buses plying Commonwealth Avenue for compliance with minimum health protocols, which includes checking of vaccination cards, on January 12, 2022. Jonathan Cellona, ABS-CBN News
Members of the Land Transport Office and the Inter-Agency Council for Traffic (I-ACT) inspect public utility buses plying Commonwealth Avenue for compliance with minimum health protocols, which includes checking of vaccination cards, on January 12, 2022. Jonathan Cellona, ABS-CBN News

MANILA — The Asian Development Bank (ADB) said on Friday it expects the Philippine economy to grow by 6 percent this year after a 5.1 percent expansion in 2021. 

But ADB Country Director for the Philippines Kelly Bird noted that the current surge in COVID-19 cases will slow the country's growth in the first quarter. 

But since the surge is attributed to the omicron variant, he expects it will resolve on its own as quickly as other surges in South Africa and Europe blamed on the strain. 

"We are currently in (COVID-19) Alert 3 from Alert 2 and that will pose a slight drag on growth in the first quarter of this year. It has affected confidence, even with Alert Level 3, less people are going out to restaurants so that will be a drag for retail. Because it is more contagious, it will result in an increase in absenteeism, and it is going to disrupt supply chains for the next 6 to 8 weeks," Bird said. 

"We’ve seen this in other countries. We expect the same will ultimately occur here in the Philippines as well.”

Banco de Oro (BDO) chief market strategist Jonathan Ravelas, meanwhile, is also hopeful the current surge will resolve just as rapidly as it escalated, but he also expects it to cause disruptions in the coming weeks. 

He noted that some Philippine policies will also have the same effect. 

"Especially with the recent implementation of transport 'no vaccine, no ride'. That could particularly impact the food processing business, especially those that commute. That could cause delay in production," he said.

"These problems in production not just here, but around the world, are expected to create some problems in terms of inflation."

Ravelas said high inflation is no longer transitory, or temporary, as suggested by Bangko Sentral ng Pilipinas. He warned that if core inflation — which strips out the more volatile food and energy inflation — exceeds 4 percent, the central bank may actually have to pull the trigger on normalizing record low-interest rates sooner than anticipated.

The fact that the US Federal Reserve may actually normalize ahead of schedule to deal with its own surging inflation rate, with a rate hike possibly happening as early as March, BSP could be pressed into action as well.

Ravelas noted, inflation has been on a downtrend for the last 5 months due to government’s efforts to import key items such as rice and pork.

Both Bird and Ravelas are encouraged by the significant improvements in the Philippines' vaccination efforts, saying several factors are pointing to a stabilizing recovery for the country.

However, Bird said there is a significant risk of job losses and education setbacks leading to skills erosion. In other words, the pandemic has eroded the future quality of Filipino labor greatly, and there is a great need to reverse this, he said.

The ADB is setting up a new grant system to finance the short-term training of employees in 5 priority sectors: agribusiness, construction, ICT-animation, tourism, and women’s enterprise to help address the problem. Phase 1 of the pilot project is set for launching this quarter, and will run until 2023, he bared.

The ADB is planning up to $3 billion in loans for the Philippines this year to fund infrastructure, climate change initiatives, post-COVID recovery, and skills development.

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