PH economy may not return to 6% growth post-pandemic – analyst

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Metro Manila (CNN Philippines, July 24) — The Philippines will have trouble returning to its above-6 percent growth track in the next two years in the absence of strong spending to perk up economic activity, a bank analyst said Friday.

Nicholas Antonio Mapa, senior economist at ING Bank in Manila, said the local economy may be in for a bumpy L-shaped recovery, rather than the sharp V-shaped pickup expected by President Rodrigo Duterte's economic managers heading into 2021.

Based on Mapa's estimates, the Philippines will have a hard time pushing growth to pre-pandemic levels in the absence of aggressive fiscal stimulus meant to encourage consumer spending and business reopenings, especially as consumption drives most of the local economy.

The fear of getting infected has kept activity muted, with malls nearly empty and restaurants barely filled despite relaxed rules. To add to that, remittances from overseas Filipinos –– which support the spending for needs and wants of their relatives here –– have plunged and are unlikely to quickly return to previous levels as thousands of migrant workers fly home.

ING sees remittances down by a tenth to $27.1 billion this year, larger than the central bank's projected 5 percent fall.

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Mapa expects a steady contraction for the rest of 2020, with the biggest slump at 6.3 percent from April-June after the first quarter's surprise 0.2 percent slump. The economy is expected to shrink by 5.8 percent in the third quarter and by 3.5 percent in the fourth quarter before returning to positive territory in January-March next year.

The government projects a contraction of at least 2 percent to as wide as 3.4 percent this year, while international observers brace for an even deeper recession.

The economy may bounce back come 2021, but only at a peak of 5.8 percent by July-September next year, Mapa said. This is well below the government's 8-9 percent full-year forecast.

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The government must swoop in with a "sizeable" spending plan to save the day, the ING economist added, with a bigger budget for income replacement and similar moves to revive consumption better for an economic revival.

Mapa backed the ₱1.3-trillion stimulus package approved by the House of Representatives in June called the Accelerated Recovery and Investments Stimulus for the Economy or ARISE bill, saying it's a good place to start to revive activity and demand. However, Acting Socioeconomic Planning Secretary Karl Chua said this isn't "fundable," while Finance Secretary Carlos Dominguez III earlier said he's not keen on pouring all aid in one go.

"There is a danger that you lose the war on the first battle. You might not have an economy to save next year," Mapa responded.

The bank economist pointed out that benign inflation, which settled at the low end of the central bank's 2-4 percent target range, is another sign of a "depressed economy." He added that the Bangko Sentral ng Pilipinas already did the heavy lifting by cutting interest rates, so it's time for fiscal authorities to do their part.