Revisiting 2021 growth outlook

PHILIPPINES - In Brief 14 Sep 2020 by Romeo Bernardo

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We are revising our overly pessimistic 4% GDP growth forecast for 2021. The number suggests that recovery will be in fits and starts coinciding with repeated region-wide lockdowns. While we cannot from experience rule that out, it is not our base case scenario. Rather, we expect ongoing experimentation on how far restrictions can be eased to allow more economic activity without significantly raising health risks to better inform policy choices over time. From a dance that moves two steps forward and one step back, we think that accumulated learnings will, in time, allow more steps forward and less back. A significant step taken by the Inter-Agency Task Force for the Management of Emerging Infectious Diseases (IATF) over the weekend is to ease distancing rules in public transportation based on evidence from other countries that, subject to greater discipline, public transport can be safe and not a significant source of virus transmission[1]. Depending on how well the latest policy can be implemented, the planning secretary estimates that easing public transport constraints will enable close to 60% of Metro Manila’s economy to operate under General Community Quarantine (GCQ) vs. around 35% under stricter distancing rules. This is something we will keep an eye on given its importance in demonstrating the country’s ability to balance the needs of both health and economy. For now, we expect a recovery path where 3Q20 GDP will be an improvement over 2Q and 4Q an improvement over 3Q, expecting that some pent-up demand will be unleashed over the holidays. Thence, it will be a slow climb with vaccine availability, effectiveness, affordability and distribution still uncertain. U...