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, an international think tank said.
In a recent research note, Fitch Solutions—the research arm of the Fitch Group—said that since the country’s growth is heavily reliant on consumer spending, the continued mobility restrictions will nip the country’s growth potential in the bud.
Fitch Solutions said they forecast the Philippine economy to “only partially recover its losses in 2020,” with their forecast for growth “at just 7.6 percent in 2021.”
“Indeed, a high reliance on domestic consumption made the economy particularly vulnerable to lockdown measures imposed by authorities to contain outbreaks and will limit the ability of the economy to rely on rebounding global trade to kickstart the recovery,” Fitch Solutions said.
“With Covid-19 cases averaging over 1,700 a day as of January 26 and the threat of more contagious strains, authorities will likely have to maintain some elements of mobility restrictions through the course of the year,” it added.
Fitch Solutions also warned that a major downside risk to the Philippine outlook is another domestic surge in Covid-19 cases.
“As highlighted, 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.
“Vaccinations should begin in February but with a population of around 109 million and distrust towards vaccines, the economy’s vulnerability to further Covid-19 outbreaks will remain high through 2021,” it added.
Aside from Fitch Solutions, more and more economists are looking to mobility as a crucial indicator of recovery.
Just last week, Bangko Sentral ng Pilipinas (BSP) governor Benjamin Diokno said they are starting to adopt so-called user-based “mobility indicators” to track economic activity in the country, especially in relation to pre-Covid levels.
An early assessment from the BSP using Apple mobility data showed that the Philippines is among the slowest in the Asean-5 to regain its mobility in 2020.
As of December, the Philippines has the lowest mobility indicator followed by Singapore and then Thailand. Malaysia, Vietnam and Indonesia are already back to pre-Covid mobility levels.
“These indicators provide a more granular and real-time look at consumer and business activity. They complement the usual macroeconomic indicators like manufacturing indices and Gross Domestic Product [GDP],” Diokno said.