Living with Covida Loca
With the emergence of highly transmissible virus mutants and the use of repeated lockdowns to control surges in infections, we are revising our earlier premise that the economy could progressively open up as immunization expands. Rather, we now think the more probable scenario is that the economy would be under indefinite mobility restrictions of varying stringency, with the threshold for herd immunity a moving target.
With this year’s recovery in fits and starts, we expect GDP to grow at a lower 3.5% for the full year, weaker than government’s downwardly revised 4-5% target. We are however keeping our 6.5% forecast for 2022, factoring some bounce back, as more vaccines are administered and preferred western brands become more widely available. We expect growth prospects further out to fall by at least 1ppt below pre-pandemic due to scarring from the prolonged crisis. The rest of this report discusses the peso’s weakness, government’s underspending, the widening trade gap and the craziness/political genius of the President’s declaration to run for vice-president in 2022.
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