MANILA - Japanese investment bank Nomura said on Monday it expects the Philippines to continue to lag behind its neighbors in terms of economic recovery after missing its window for additional fiscal stimulus to offset the effects of the COVID-19 pandemic.
Euben Paracuelles, Southeast Asia Economist for Nomura, said Singapore is their top pick for the region, forecasting a growth rate of 7.5 percent-- much higher than4 to 6 percent growth expected by the city-state’s authorities.
“On the other side, Thailand and the Philippines will be the laggards.”
Paracuelles said the economies of both Thailand and the Philippines are not likely to return to pre-COVID levels until late next year.
The Philippines will have a slower recovery because of the country’s slow vaccination rollout, as well as its smaller fiscal stimulus compared to other nations, paracuelles said.
“In terms of fiscal support, if you look at the packages passed by government, it is not really comparable to the rest of the region where we see all kinds of packages announced like wage loans, etc,” the Nomura economist said.
He added that there may not be enough time to ramp up fiscal stimulus.
“Congress is in recess until late July, the window to pass any more measures is essentially closed."
Paracuelles added that the expiration of Bayanihan 2, which they thought was not significant in the first place, means there is even less room for the Philippine government to increase spending.
However, Paraceulles said the Philippine government can still support growth through aggressive infrastructure spending. He said he expects infrastructure spending to pick up in the second half of the year, and with the election season coming up, this would be boosted further.
"In the years prior, in the second half before the elections we tend to get outsized spending on infra. This will help the recovery somewhat.”
Nomura cut its GDP growth forecast for the Philippines to 5.5 percent in April, from 6.8 percent, due to the spike in COVID-19 cases which forced a return to tighter quarantine conditions that month.
The ASEAN plus 3 Macroeconomic Research Office recently suggested the Philippines should use its ample fiscal space to spend more in support of severely affected sectors, specifically micro, small and medium enterprises.
The Philippine economy shrank by a record 9.6 percent in 2020, the worst post-war contraction and the worst in the ASEAN region. The country remained in recession in the first quarter of the year, posting a -4.2 percent growth rate.