THE extension of the modified general community quarantine (MGCQ) in Metro Manila and its surrounding provinces could slow the country’s economic recovery, according to a local think tank.
In the latest Market Call report, First Metro Investment Corp. (FMIC)-University of Asia and the Pacific (UA&P) Capital Markets Research said the MGCQ would “provide some headwinds in the future.”
This, even though the 2.1 million jobs that were created in March were higher than the 1.9 million jobs created in February.
“The strong job numbers should help boost consumer spending, although the extended quarantine restrictions in Metro Manila Plus could dampen it, and fractured supply chains may constrain stronger production gains,” FMIC-UA&P Capital Markets Research said.
Meanwhile, the think tank said, hope is not lost given that infrastructure spending has increased and export earnings have recovered.
FMIC-UA&P Capital Markets Research said infrastructure spending posted a 26.7-percent year-on-year increase in the first quarter. This indicates that this kind of spending has gained traction and could continue for the rest of the year.
In terms of exports, the think tank said the 31.6-percent growth in exports in March was a welcome surprise. This provided some optimism enough for the policy-makers to expect that this could be sustained this year.
“The possible constraints may lie, however, in supply chains’ responsiveness and the amorous view of top policy-makers towards the peso appreciation of late,” the research group, however, said.
Meanwhile, FMIC-UA&P Capital Markets Research said inflation remains in check and could lead the Central Bank to keep its policy rates.
The think tank noted that cheaper food prices such as rice and vegetables have kept inflation at bay. In April, the Philippine Statistics Authority (PSA) reported inflation averaged 4.5 percent.
It added that 7 out of the 11 food categories saw falling prices or at least a slower pace from a month earlier. The increase in rice prices, which account for 9.6 percent of the consumer price index, contracted 0.3 percent year-on-year.
Earlier, local economists said consumers’ fear of Covid-19 continued to prevent them from spending in the first quarter, leading to a contraction in GDP growth in the January-to-March period.
The PSA reported that GDP contracted 4.2 percent in the first quarter of the year, marking the economy’s fifth consecutive quarter of decline.
According to economists, economic recovery will only ensue if “bold spending” is done on vaccination, testing and contact tracing. The Philippine economy is a consumption-driven one.
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