The Philippines is expected to pick up its economic momentum in the last quarter of the year as restrictions are eased, but this will not be enough to pull off a strong rebound as the government had projected.
For the sixth time, Oxford slashed its GDP forecast to 3.4 percent from 3.5 percent. Its original forecast was a high of eight percent.
“We expect that domestic demand remained under pressure for much of the third quarter given the Delta variant-driven surge in new COVID-19 cases and tight restrictions, though some measures have started to ease since early August,” Tsuchiya said.
The government reimposed in August the third round of lockdown in Metro Manila and other provinces amid high cases due to the Delta-driven surge.
Oxford’s latest forecast falls below the government’s revised four to five percent target for 2021.
While the economic team already said growth likely slowed in the third quarter, they remain confident of hitting the full year target, as more businesses and sectors are allowed to operate again and as consumption is expected to pick up with the holiday season just around the corner.
“We believe sequential momentum will pick up in the fourth quarter and into 2022, but the low vaccination rate makes the country vulnerable to setbacks,” Tsuchiya said.
“Foreign demand should fare better, but prolonged supply disruptions are a main downside risk,” he said.
The government has already revised its target of achieving herd immunity as vaccination is still at around 20 percent, just more than two months before the year ends.
The Department of Health said vaccinating 70 percent of the population is feasible by the first quarter of 2022 at the earliest.
Further, Oxford said inflation in Southeast Asia will edge up in the coming quarters given high commodity prices and logistical costs and softer currencies.
But, government measures, particularly electricity discounts and fuel subsidies across several economies, and soft demand will keep a lid on inflation.
“The Philippines is the key exception as inflation rose and is set to hover around the top of the central bank’s inflation range well into the first half next year,” Oxford said.
With that, the think tank expects the Bangko Sentral ng Pilipinas to keep interest rates at record lows to support economic recovery.
With the latest forecast, among the emerging markets (EMs), the Philippines will now lag behind in terms of economic growth as compared with India’s 7.9 percent and China’s eight percent. EMs, on average, are expected to post an average 6.6 percent growth.
In the ASEAN region, the country’s GDP growth is also seen to be lower than that of Vietnam’s 3.7 percent and Malaysia’s 3.5 percent but higher than Indonesia’s 3.3 percent and Thailand’s 1.6 percent.
By 2022, the Philippine economy is seen growing to 7.1 percent and further picking up by 8.2 percent in 2023. However, it will slow down to seven percent by 2024.