MOODY’S Analytics, the research arm of the Moody’s Group, warned of potential threats to the local economic recovery in 2021.
In a short economic review of the Philippine economy published on Monday, Moody’s Analytics associate economist Eric Chiang said pandemic conditions could continue to weigh in on the Philippines’ economic performance in 2021 as a vaccination program remains unclear.
“A recovery hinges on the government’s plan to vaccinate as many as 70 million Filipinos this year, or two-thirds of the population, allowing social distancing restrictions to be lifted and tourist arrivals to resume,” Chiang said.
“However, the Philippines has not yet secured enough vaccines to cover its entire population and faces obstacles such as logistical challenges and growing doubt about vaccine efficacy,” he added.
Moody’s is not the only research group to warn about the effects of a slow vaccination rollout to the Philippines’ economic potential.
Fitch Solutions, the research arm of the Fitch Group, also issued a similar research note just last week, saying the Philippines is only expected to register a “partial recovery” this year, as continued movement restrictions limit the potential of a domestic consumption-dependent economy to fully recover.
“The re-imposition of lockdown measures would be highly damaging to the economy. While Philippine authorities have reportedly secured 100 million doses of Covid-19 vaccines, the timeline for the rollout and participation rates in the vaccination programme remain less clear,” Fitch Solutions said.
Moody’s Analytics also expressed belief that the Bangko Sentral ng Pilipinas (BSP) is likely “out of ammunition” for 2021 after its aggressive rate cuts in 2020 to keep the economy afloat.
This is as Chiang said, the Philippines’ policy rate is now at 2 percent and inflation is now trending closer to the top end of its 2 to 4 percent inflation target.
The central bank has cut its rates by a total of 200 basis points in 2020 – 25 basis points in February, 50 basis points in March, another 50 basis points in an off-schedule monetary board meeting in April, another 50 basis point cut in June; and the latest 25 basis point cut in November.
Inflation, on the other hand, accelerated to 3.5 percent in December 2020. For this year, the BSP is expectetd to hold its first monetary policy meeting for 2021 on February 11.