By Beting Laygo Dolor, Contributing Editor
The government may be expecting too much when it predicts an economic recovery next year equal to or even greater than last year’s growth, following the severe damage caused by the global Covid-19 pandemic.
Although two or three consecutive quarters of recession is to be expected, the Duterte administration targeted a return to growth for the economy beginning in the fourth quarter of this year, then moving at a faster pace beginning in the first quarter of 2021.
International rating agency Moody’s Analytics, however, said last week that this will not be the case.
In a report to local media, Steve Cochrane, Moody’s chief economist in the Asia Pacific region, said the Philippines would most likely lag behind its peers in the region in terms of recovery.
Despite one of the longest and toughest quarantines in the world, Covid-19 infections continue to surge and this will likely cause the country’s economy to shrink by up to 3.1 percent this year, his report said.
Only last month, Moody’s projected the contraction of the Philippine economy would be held down to a manageable 1.8 percent.
Prior to the global pandemic, Moody’s had expected the country’s economy to grow by 6.9 percent this year, about a full percentage point from the growth experienced in 2019.
Cochrane said he expects a weaker recovery for the country in 2021, at 5.2 percent from the previous estimate of 6.2 percent.
The revised forecast took into consideration the extension of the lockdown to various parts of the country, after it was only enforced in Metro Manila and the rest of the main island of Luzon in mid-March.
Economic disruptions were, therefore, more pronounced than originally believed, according to Cochrane.
Another factor that will affect the country’s growth is the “very sharp” drop in exports, which will most certainly aggravate the already precarious situation, he added.
Cochrane pointed out that on a three-month moving average basis, “exports are down by over 35 percent on a year-to-year basis as of May.”
This drop is the sharpest downturn in the Asia-Pacific region matched only be India’s export downturn, he said.
Thus, while the rest of the Asia-Pacific region can expect a gradual recovery from the third quarter onwards, the Philippines will be an exception.
According to Cochrane’s report, “All countries within the Asia-Pacific region are expected to enjoy a positive economic bounce in the third quarter except for the Philippines, which has suffered the longest and strictest lockdown in the region and whose lockdown in the region and whose count of Covid-19 cases has accelerated this month.”
Data from the Department of Health stated that as of July 24, the total Covid-19 infections nationwide had exceeded 76,000 with the death toll at nearly 1,900.
Cochrane said the most important policy moves that the Philippines needed to take should be “to bring the spread of Covid-19 under control and reduce the number of new cases on a sustained basis.”
Only then can the Philippine government broadly open up the economy again, he said.
The Moody’s chief economist for the region said the lockdown will hurt household spending, which comprises some 75 percent of the economy.
“Households will work to replenish depleted savings rather than spend on goods and services that are not essential,” he said.
Meanwhile, with the Philippines’ growing dependence on international travel and tourism, not much relief can be expected that sector.
Global travel and tourism across the Asia Pacific region will be the slowest to recover as restrictions are extended up to 2021, according to Cochrane, who said that this was significant “for small open economies of Hong Kong and Singapore and for tourism-dependent economies such as Malaysia, New Zealand, the Philippines, Thailand and Vietnam.”