Snakes and ladders
Tracking the Philippine economy’s progress under the Covid-19 pandemic is like watching a game of Snakes and Ladders. In the board game that originated in India, the race to the diagonal opposite of the board through a series of ladders to win the game can be thwarted by a throw of the die that lands the player on a snake’s head, causing him to slide down the back of the snake and away from the goal. Similarly, after climbing a few rungs since 3Q last year, the economy endured another setback when rising infections sent the nation’s capital into strict lockdown towards the end of March. Although restrictions have been eased since mid-May, a vigorous climb higher will not be possible without wider vaccination to build up consumer confidence. But while the race to quickly vaccinate as many as possible has begun, the effort is hobbled by vaccine supply uncertainty, the logistics and roll out learning curve and the high level of vaccine hesitancy. Meanwhile, another snake head may just be around the corner given more transmissible virus mutants and the Philippine’s inability to completely close off borders due to its many overseas workers. Plus, with presidential elections only a year away and no clarity on the slate of possible candidates, uncertainties are all around.
Given the muted recovery in Q1, the lockdown in Q2, the late ramp up of vaccine roll-out and the expected soft demand recovery, we are downgrading our 2021 growth forecast to 4% (from 5.5% previously) but upgrading next year’s forecast to 6.5% (from 5%). The rest of the report discusses recent disinflation, sovereign credit watch, the safe space on the external front, and remaining legislative priorities.
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