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MANILA, Philippines – The Philippines’ return to pre-pandemic level is likely to come 3 months early next year, but the growth that would make that happen will do little to save the country from being Asia Pacific’s laggard.
Since the fourth quarter of 2022, Moody’s Analytics now sees the local economy recovering all pandemic losses for the third quarter of the same year, according to a new report released Tuesday. A recovery means that gross domestic product (GDP) is at its level at the end of 2019.
The slightly earlier trend reversal is supported by faster growth this year and the next. GDP is expected to expand 6.5% year-on-year in 2021, compared to the initial 4.5% observed last January. By 2022, growth of 7.2% was recorded, faster than the 6.5% originally.
Growth in the Philippines, if realized, will be faster than most of its Asia Pacific peers, but it also masks more damage the economy suffered from the health crisis. That means that even if GDP expands more at home, it would be partly the result of a greater need to catch up in the region.
On top of that, Steven Cochrane, Asia Pacific economist at Moody’s Analytics, said the Philippines also has a low base to work in its favor, meaning expansion will inevitably be faster with so many lost profits last year. A similar case was observed in India.
“The Philippines has multiple factors working to slow down its pace of recovery. It is emerging from a very deep hole as it languished under quarantine orders for much of the past year, ”wrote Steven Cochrane, Asia-Pacific economist at Moody’s Analytics.
“It continues to fight to contain COVID-19, its fiscal policy response was quite limited, it has not yet developed an effective vaccine management system throughout its archipelago, and rising food prices limit the role of food spending. consumers to support the local economy, ”Cochrane explained.
Herd immunity only by 2023
The economic managers of the Duterte administration are already considering a revision of the growth targets set at 6.5-7.5% this year, and a more ambitious 8-10% in 2022; the targets adopted last year in the context of optimism were further relaxed in March.
But that did not happen, and in fact, the easing of restrictions has taken a step back this week after COVID-19 cases skyrocketed in Metro Manila, responsible for 32% of GDP. Cochrane said there is little evidence that curfews and liquor bans are working to stem the rise in cases, while mass vaccinations will only begin in June.
“We cannot be sure that the spread of COVID-19 can be reduced until vaccines are more widely available because quarantines in Metro Manila have not been fully effective,” he said in an email.
Therefore, herd immunity against COVID-19 is unlikely in the Philippines until 2023, while much of the region, including China, will reach that point a year earlier, Moody’s Analytics said.
That would ultimately delay the restoration of pandemic GDP losses. Among the economies assessed by Moody’s Analytics, China already rebounded to a pre-pandemic point in June last year, followed in the next quarter by Vietnam, Taiwan and New Zealand, countries with enviable responses to the pandemic. Next was India, which made a full recovery at the end of 2020.
For this year, South Korea, Australia, Indonesia and the US are projected to lead the return to the pre-pandemic level in the second quarter. Hong Kong and Japan in the third quarter, topped by Singapore in the fourth quarter.
For next year, the Philippines is only behind Thailand and Malaysia in terms of recovery.
Overall, Cochrane said there are better prospects for Asia Pacific this year. “However, there are short-term risks to this optimistic outlook if the vaccination rate is not accelerated and movement restrictions are eased too soon before there is broad immunity,” he said.
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