COVID-19 Keeps Denting The Philippines' Recovery

Moody’s Analytics downgraded its growth forecast for the Philippines this year, as a “sluggish” vaccine rollout may leave it vulnerable to a fresh wave of coronavirus disease 2019 (COVID-19) infections.

It now expects the country’s gross domestic product (GDP) to grow by 4.9% this year, a tad slower than the 5.3% estimate it gave in May. The latest forecast is also more pessimistic than the government’s 6-7% full-year target.

Moody’s Analytics Senior APAC Economist Katrina Ell and Associate Economist Dave Chia said GDP growth this year has remained “relatively low” due to the quarantine restrictions in Manila and the slow national vaccination program.

“We are closely monitoring the performance of domestic demand and the COVID situation, and may adjust the GDP forecast if the outlook becomes more optimistic,” the economists said.

By 2022, they expect the Philippines’ GDP to grow by 7%.

In its latest note titled “Macro Roundup: COVID-19 Keeps Denting Southeast Asia’s Recovery” released on Monday, Moody’s Analytics said a faster vaccination drive will be crucial to support the Philippine economy as outlook is already improving amid lower COVID-19 infections and easing restrictions.

“Declining COVID-19 cases in the Philippines pave the way for its economic recovery as retail activities start to pick up. However, the country needs to step up its vaccination efforts, as the sluggish campaign leaves it vulnerable to fresh resurgences,” the report authored by Ms. Ell and Mr. Chia said.

Moody’s Analytics acknowledged that the situation in the Philippines has improved as cases declined from the peak of 11,000 new cases seen around late March to April.

The Health department reported 5,392 new COVID-19 cases on Monday, bringing the active cases to 51,594.

Based on Bloomberg’s vaccine tracker, it will take 21 months for the Philippines to cover 75% of its population at its average rate of 236,867 jabs per day. As of July 4, 2.86 million have been fully vaccinated in the Philippines, while 8.83 million have received their first vaccine dose.

The government aims to vaccinate 500,000 people daily in Metro Manila, Rizal, Bulacan, Cavite, Laguna, Metro Cebu and Metro Davao to achieve herd immunity in these high-risk areas by end-November. However, delays in the delivery of supplies will affect the rollout.

As restriction measures are gradually eased, analysts said some businesses will benefit but other industries will likely continue to see muted activities.

“Consumer-facing businesses such as food and beverage and broader hospitality services will continue to benefit with the government easing restrictions in Manila, as households are allowed to more freely access goods and services,” Ms. Ell and Mr. Chia said.

“However, hotel and service exports will continue to underperform and will be sluggish to recover as international arrivals remain well below pre-pandemic levels,” they added.

The economy shrank by 4.2% in the fourth quarter. Philippine GDP contracted by a record 9.6% in 2020.

STILL A LAGGARD

Meanwhile, investment bank Nomura said the Philippines and Thailand will continue to lag behind Southeast Asian peers in economic recovery this year.

In a virtual media roundtable on Monday, Euben Paracuelles, Nomura’s chief economist for ASEAN, said the country’s economic output is only seen returning to pre-crisis levels by the third quarter of 2022.

Mr. Paracuelles said the Philippines is struggling to recover at a faster rate because of the slow pace of vaccination compared with its peers, as well as the lack of fiscal support from the government.

“If you look at the packages that has been passed by the government, it’s not really that comparable to the rest of the region where you see all kinds of packages being announced from wage subsidies to healthcare spending, and other types of support measures,” he said.

While the second stimulus package worth P205 billion under Bayanihan to Recover as One Act (Bayanihan II) was “not that impactful” to offset the fallout from fresh outbreaks and lockdowns, he noted that underspending still persisted and agencies were not able to fully utilize the funds before the law expired on June 30.

Data from the Budget department showed agencies were only able to spend P141.45 billion from Bayanihan II, five days before the law’s expiration, leaving P63.55 billion of unspent funds.

“Bayanihan II was not really that impactful when trying to provide some offset to the new pressures on growth. This now expires so there’s even less room for them to do more fiscal spending, which I think is really necessary. Other countries were able to provide more sizeable measures and a little bit faster,” Mr. Paracuelles said.

He said it remains uncertain if the government can still pass another stimulus package with Congress on recess until late-July.

The Philippines recorded $30.453 billion in monetary and fiscal stimulus measures so far, which was the fifth-highest coronavirus package among 11 Southeast Asian countries, data compiled by the Asian Development Bank (ADB) showed.

The country’s package accounted for 8.62% of its economic output and translated to spending per capita of $281.67.

In April, Nomura slashed its growth forecast for the Philippines to 5.5% this year from 6.8% previously.

Mr. Paracuelles said infrastructure spending will have to provide the much-needed boost for the economy, especially ahead of the national elections in May 2022.

“That’s going to help the recovery somewhat, but what that also means it will increase importation and therefore the current account deficit will widen in the second half, which makes the country relatively vulnerable to capital outflow risks,” he warned.

Meanwhile, Mr. Paracuelles said they projected inflation to average at 3.9% by year’s end on expectations that the monthly print will start easing after two to three more months of breaching the central bank’s 2-4% target.

source: Bworldonline

Share of Tourism to GDP is 5.4 percent in 2020

In 2020, the contribution of Tourism Direct Gross Value Added (TDGVA) to the Philippine economy, as measured by the Gross Domestic Product (GDP), is estimated at 5.4 percent.

The TDGVA amounted to PhP 973.31 billion in 2020, lower by -61.2 percent compared with the PhP 2.51 trillion in 2019.

All forms of tourism expenditures posted downturns in 2020: inbound tourism expenditure declined by -77.9 percent, while domestic tourism expenditure by -82.3 percent, and outbound tourism expenditure by -73.2 percent. Internal tourism expenditure, comprising inbound and domestic tourism expenditure, decreased by -81.6 percent.

Inbound tourism expenditure, which refers to the expenditure of non-resident visitors (foreign visitors and Filipinos permanently residing abroad) within the Philippines, shared 2.9 percent to the country’s total exports in 2020.

On the other hand, domestic tourism expenditure, which covers expenditures of resident visitors within the country either as domestic trip or part of an international trip, contributed 4.1 percent of the household final consumption expenditure.

Employment in tourism characteristic industries declined in 2020

Employment in tourism characteristic industries was estimated at 4.68 million in 2020, lower by -18.1 percent compared with 5.72 million in 2019. Share of employment in tourism industries to total employment in the country was recorded at 11.9 percent.

The Philippine Tourism Satellite Accounts (PTSA) is compiled annually by the Philippine Statistics Authority (PSA).

Source: PSA

Philippines Drops To Lowest Competitiveness Ranking In 5 Years

The Philippines slipped seven spots in an annual global competitiveness report, the steepest decline in Asia after its economic performance slumped amid the coronavirus disease 2019 (COVID-19) pandemic.

Switzerland-based business school International Institute for Management Development’s (IMD) 2021 World Competitiveness Report ranked the Philippines 52nd out of 64 countries, down seven spots from 45th last year. This year’s ranking is the Philippines’ lowest in five years.

Switzerland took the top ranking overall in this year’s World Competitiveness Index, followed by Sweden, Denmark, and the Netherlands.

The country still lags in the region, as it ranked 13th out of 14 Asia-Pacific economies.

Singapore took the highest spot among Asian economies at fifth place, followed by Hong Kong (7th), Taiwan (8th), and China (16th). At the 60th spot, Mongolia was the only Asia-Pacific economy behind the Philippines.

“This year’s results expose the strengths and weaknesses of the world’s economies under the litmus test of the COVID-19 pandemic and how economies that were caught most off guard with managing the health side of the pandemic were not necessarily those that suffered the most on an economic level,” IMD said.

The IMD report ranked a country’s competitiveness using indicators grouped under four factors: economic performance, government efficiency, business efficiency, and infrastructure.

The Philippines’ performance according to IMD declined after the economy slumped by a record 9.6% last year. The country implemented one of the world’s longest and strictest lockdowns, leaving many out of work and businesses struggling to survive.

“Its economic performance fell the hardest due to its poor domestic economy, international investment and employment which saw unemployment rates double from around 5% to more than 10%. It has also suffered in its public finances and productivity of firms in the private sector.”

The annual unemployment rate reached a record-high 10.3% last year, versus the 5.1% in 2019. This is equivalent to 4.5 million Filipinos who do not have jobs, but are looking for one.

According to IMD, the Philippine rankings dropped in three of the factors — plunging to 57th spot from 44th in economic performance and falling three places to 45th in government efficiency. Business efficiency slipped four spots to 37th due to poorer performance in productivity, labor market, finance, and management practices.

The country retained its poor infrastructure ranking at 59th for a third straight year, despite the government’s massive “Build, Build, Build” program.

IMD World Competitiveness Center Chief Economist Christos Cabolis said that the country’s decline in ranking is not specifically related to its recent response to the COVID-19 pandemic.

“Its long-term performance has also played a part, which limited its options in addressing the health and economic crises,” he said. “Digitally advanced economies that have seamlessly transitioned to ‘work-from-home’ have thrived compared to their peers.”

The economies that did well, he added, are those that have set up long-term trends in innovation, digitalization, social nets, health, and social cohesion.

Chris Nelson, British Chamber of Commerce executive director, said the lockdowns adversely affected the country’s consumer-driven economy, especially in Metro Manila.

“What investors and people are looking at is clarity. Particularly in the case of the Philippines, you’ve been particularly affected by certain key sectors: transportation, hotels, tourism, real estate. So this will change if we can get more clarity,” he said in a phone interview, referring to vaccine and other pandemic-related programs.

European Chamber of Commerce of the Philippines President Nabil Francis in a mobile message on Wednesday said that the chamber supports workforce skills development measures to improve the country’s competitiveness.

“The recent ranking is a call for policy makers to swiftly enact key economic reform measures,” he added, naming foreign investment liberalization measures pending in Congress.

Comparing the Philippines’ performance to Asian economies that took the top spots, Mr. Francis said “population size also plays a role in the competitiveness of some economies as is the case with Singapore and Hong Kong with relatively smaller demographics.”

The Philippine results reflect the impact of the pandemic, the Asian Institute of Management’s center for competitiveness said in a statement on Thursday.

“Some of the challenges that the Philippines face in 2021 include ensuring inclusive economic recovery and quickly reviving business and consumer confidence, effectively controlling the COVID-19 pandemic and implementing full vaccination rollout, building resilient social infrastructure, especially in health and education, sustaining increased investment in physical and digital infrastructure, and maintaining fiscal health while adequately providing stimulus and support, especially for vulnerable sectors,” the center said.

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Source: The IMD World Competitiveness Yearbook and Bworldonline