MANILA - The ASEAN + 3 Macroeconomic Research Office or AMRO cut its growth forecast for the Philippines for 2021 and 2022 due to the continuing disruptions caused by COVID-19's DELTA variant.
From a previous forecast of 6.9 percent for 2021 and 7.8 percent for 2022, AMRO said it now sees the Philippine economy growing just 4.3 percent this year, and 6.7 percent next year.
AMRO gave the Philippines a growth forecast of 7.4 percent for 2021 in January, but it cut that to 6.9 percent in March.
The latest outlook takes into consideration the COVID-19 resurgence driven by the Delta variant, as well as the progress of vaccination programs and the use of stricter quarantine restrictions.
“Because of the recent wave of infections we had to shave down our forecast for the Philippines,” said Hoe Ee Khor, chief economist at AMRO.
AMRO's downgrade is only the latest in lowered outlooks for the country. Philippine economic managers have also cut their growth target for the year following the recent surge in COVID-19 cases.
Khor however is optimistic the Philippines will be able to bounce back to pre-pandemic levels quickly, possibly as early as 2022, with vaccination projected to hit 80 percent of the target population by next year.
“That is very important because the Philippines is very much a service-oriented economy. That is the reason why it has been hit harder than other economies in the region."
The AMRO economist also noted that the country can still afford to spend to support businesses and households. The think tank also encourages the Philippines to "use the policy space they have to provide support, avoid economic scarring, and allow businesses to bounce back faster," Khor said.
AMRO data also showed the Philippine economy is in a good position to wind down extraordinary accommodative policy support while managing risks well. But the think tank also cautioned against withdrawing support prematurely.
It noted that there could be additional distress in businesses and households once the normalization of such policies begins.
AMRO recommended that the Philippines maintain its current accommodative monetary policy and macroprudential settings, increase government spending, and expand lending.
AMRO's forecast puts the Philippines as the second-fastest growing economy in the region this year, behind only Singapore which is projected to grow 6.3 percent.
In 2022, the new 6.7 percent growth forecast will again make the Philippines the second-fastest growing economy in ASEAN, behind Vietnam and tied with Malaysia.
BDO’s Chief Market Strategist Jonas Ravelas meanwhile noted that while the Philippines has seen significant downgrades on its growth outlook for 2021, it isn’t alone in the region and it isn’t the worst, with Thailand suffering the biggest forecast cuts so far.
However, AMRO noted the Philippines is suffering from one of the highest unemployment rates in the region, based on jobs data from the pandemic peak and the most current data.
The data however also show the Philippines had a relatively higher jobless rate compared to many other ASEAN economies before the pandemic started.
The economy shrank 9.6 percent last year, its worst contraction since World War 2, as the government shuttered non-essential businesses to curb the spread of COVID-19.