PH economy to grow at milder pace in Q4 — poll

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Metro Manila (CNN Philippines, January 21) — The Philippine economy still expanded in the last quarter of 2021 but at a slower pace yet again, according to analysts' projections.

A CNN Philippines poll among 15 economists yielded a forecast range of 3.9-7.8% for growth this October to December — or an average of 6.25%. While this pace is quicker than the 8.3% slump recorded in the same period in 2020, it's slower than the surprise 7.1% expansion in the third quarter last year.

The country gradually implemented the alert level system during the stretch, veering away from community-wide restrictions. Initially starting at the second tightest Alert Level 4, the entire Philippines was under the looser Alert Level 2 until year-end.

"The significant improvement in our mobility amidst declining Covid cases and improving vaccination statistics has been the main driver of improving recovery momentum," said Bank of the Philippines lead economist Emilio "Jun" Neri, as he pegged fourth quarter growth at 6.5%.

Still, setbacks weighed on prospects of expansion during the period.

RCBC chief economist Michael Ricafort — who expects a 7% rise in economic output — also said there are "missing pieces" in recovery: lingering restrictions on foreign tourism and face-to-face classes, along with Typhoon Odette.

"Although the storm damage from super Typhoon Odette may have shaved off some growth potential, the sheer pickup in activity notably in the capital region will likely be enough to lift growth," said Security Bank chief economist Robert Dan Roces, as he projected a 5.8% pace for the quarter.

Oxford Economics assistant economist Makoto Tsuchiya, meanwhile, noted how other economic indicators affected the trajectory of growth then.

"[H]igh underemployment rate and only modest growth in remittances likely put a lid on private consumption growth. At the same time, weaker demand from China and other major trading partners resulted in slower growth in goods exports," said Tsuchiya, whose growth forecast for the period was 3.9%.

Still, economists expect full-year growth to settle above 5% on average — the lower end of the government's latest target band — but not without the aid of favorable base effects.

"Considering the low base in 2020, we were in a better shape last year even though pandemic risks continued to weigh in our economy," said Regina Capital managing director Luis Limlingan, who also cited improvements in the manufacturing sector's performance for instance.

What's in store for 2022

Market watchers say the economy will continue to face challenges posed by the COVID-19 pandemic, especially with the feared Omicron variant making its way into the country

"Revenge spending and the holiday cheer came to an abrupt halt as Covid cases began to accelerate sharply to close out 2021. 2022 greeted us with cases hitting new highs as infections spread rapidly in areas that had high mobility during the Christmas season," said ING Bank Manila senior economist Nicholas Antonio Mapa.

While the country is seeing relatively lower hospital utilization rates so far, Mapa said it can't be denied that the current uptick in cases "disrupted" the momentum of recovery.

Meanwhile, University of Asia & the Pacific economist Dr. Bernardo Villegas is optimistic the country can return to its pre-pandemic growth level even as it braces for the national polls — counting on the relaxation of mobility in the months ahead.

"Even with the ban on public works during the months immediately preceding the May elections will not result in a significant slowdown of construction activities, considering the massive reconstruction efforts that will happen in the six regions in the Visayas and Mindanao that were devastated by Typhoon Odette," Villegas said, adding calamity funds in the 2022 budget will be complemented by higher tax shares of local governments under the Mandanas-Garcia ruling.

The economist also expects the eventual return of more students to face-to-face classes along with employees to their offices — also leading to a spike in demand for services such as transport and dining.