THE Philippine economy is expected to grow by 6 percent or better this year and next year, mainly due to base effects, according to the latest report released by the United Nations Economic and Social Commission for Asia and the Pacific (Unescap).
In its Economic and Social Survey of Asia and the Pacific for 2021, Unescap said the Philippine economy is projected to grow 6.5 percent this year and 6 percent next year. This is more optimistic than the 6.1 percent projection Unescap made last year for 2021.
The report also showed that inflation is expected to average 2.9 percent this year and 3.1 percent in 2022. The inflation estimate for 2021 is lower than the initial forecast made by Unescap at 3.1 percent last year.
“It’s a bit too early; there’s a lot of uncertainty around the parameters such as vaccines being rolled out a lot. However, at this point in time, our expectations are the region will see an increase in GDP growth in 2021 and 2022. Primarily, it is what we call base effects, which means the level of activity in 2020 was so low that anything you have in 2021 in growth terms, you’ll see a big number,” Unescap Macroeconomic Policy and Financing for Development Division Director Hamza Ali Malik said.
Malik said the forecast takes into account that aspects of the Covid-19 impact are temporary and that vaccine rollouts have already begun.
He added that governments are expected to maintain accommodative fiscal and monetary policies while export and regional value chains remain strong.
It is worth noting, Malik said, that major economies globally are on their way to recovery. This will also allow other countries, including developing nations, to see better economic growth.
However, the risks to this outlook are tilted to the downside because of the slow progress and uncertainties associated with vaccination.
The performance of trade in services, which includes international tourism, will remain subdued while debt distress remains on the rise.
Projected risks
Malik projected long-lasting impacts on productivity; capital flow uncertainties and the risk of stagflation; and lingering trade tensions.
In order to address these risks, UN Sustainable Development Solutions Network President Jeffrey Sachs cited a need to chart a path to green and sustainable economic growth. This would require investments in key sectors.
These sectors include health, education, and technological upgrading. Sachs said children must be able to stay in school, receive quality education, and be healthy enough to complete their studies.
The third investment in technology means “a green, digital, and sustainable recovery and growth.” Sachs said this will enable all sectors of the economy to depend on “universal digital access.”
These investments will lead to the use of artificial intelligence; advanced robotics; remote sensing; and other technologies. Sachs said this “will play a fundamental role in ensuring competitiveness of economies.”
Investing in technology, Sachs said, should also include those that will allow countries to deal with climate change, not just for years, but also decades, after the pandemic.
“This is already upon us, every day, every week, every month, and every year. We’re going to have climate challenges all over the world until we make the decisive steps to reach net zero emissions and climate neutrality and to do that by mid-century,” Sachs said.
On average, developing Asia-Pacific economies are expected to grow by 5.9 percent in 2021 and 5 percent in 2022, after having experienced an estimated contraction of a percent in 2020.
Despite a reasonably strong rebound expected in 2021, a “K-shaped recovery” is likely, with poorer countries and more vulnerable groups marginalized in the post-pandemic recovery and transition period.
“Covid-19 is a shock like no other and it requires a response like no other,” said Ms. Armida Salsiah Alisjahbana, United Nations Under-Secretary-General and Executive Secretary of Escap. “The time is now for the Asia-Pacific region to seize this opportunity to speed up and make its transition towards more resilient, equitable, and green development the centerpiece of the post-pandemic economic recovery.”
The Survey estimates that because of the pandemic, an additional 89 million people in the region could have been pushed back into extreme poverty in 2020 at the $1.90 per day threshold, erasing years of progress in poverty reduction.
Working-hour losses in 2020 equaled 140 million full-time jobs, while severe disruptions of economic activity and education are likely to have caused a significant setback to human capital accumulation and productivity in the region.
For a more robust and inclusive recovery, the Survey calls for a more synchronized Covid-19 vaccination program across countries and highlights opportunities to leverage regional cooperation. At the same time, it recommends that fiscal and monetary support should be sustained, as premature tightening could increase long-term scars.
The Survey also recommends that countries in the region respond aggressively to adverse shocks to minimize the reversal of hard-won development gains. Swift and robust policy responses are needed to safeguard sustainable development in crisis times, and risk management must become central to development planning and policymaking.