ANTICIPATING a prolonged recession, Bank of the Philippine Islands (BPI) Lead Economist Emilio Neri Jr. said that a W-shaped rebound is expected for the Philippine economy.
During a recent online forum hosted by the bank, Neri explained that this is a trend “wherein the economy begins to recover rapidly, but then falls into a double-dip recession, but ending with another sharp rise.”
The country’s GDP slipped by 10 percent as of end-September on average after posting a contraction in three consecutive quarters, according to the Philippine Statistics Authority.
According to his latest forecast, full-year GDP may plunge by 11 percent in 2020 amid the continued economic slump, coupled with the damage caused by the recent typhoons.
Neri added that the economy may then grow by 7 percent next year on the back of improved mobility and wider shift to digital. However, he said that the economic output level will not be back to 2019 levels yet.
The earliest that a full economic recovery is seen is in 2022, he said.
To boost economic recovery, the BPI economist said a “stronger and more focused stimulus” is needed next year. It is also necessary to have quicker reopening of the economy to boost activities, he added.
“Production is responding positively to easing of quarantine measures. But the country’s recovery may continue to fall behind our Asean [Association of Southeast Asian Nations] neighbors if reopening remains slow and fiscal response remains too conservative,” Neri explained.
Last week, the Senate passed on third and final reading the bill extending Bayanihan 2 appropriation, which was initially set to conclude on December 19. It is a stimulus package providing P140 billion in regular appropriation and P25 billion for standby funds.
According to a report by the Department of Budget and Management, it has disbursed P102.53 billion of the Bayanihan 2 funds.
V-shaped for some
Economist Thierry Apoteker, chairman of France-based economic advisory firm TAC Economics, pointed out in the same forum that the path to recovery remains bumpy because of threats of further Covid-19 infection, leading to lockdown measures.
“Several economies will likely experience an asymmetric V-shaped recovery which will last for at least two years,” he said. Apoteker explained that the pace of recovery will vary across economies.
While Apoteker agrees that the economy will not return to prepandemic levels next year, he observed that consumption patterns were showing “significant changes” already.
In addition, he said that unconventional monetary policies will likely continue in 2021 amid the slow pace of economic recovery.
“As a result, liquidity will remain substantial in 2021. Low returns in the bond market might force investors to seek returns in high-risk assets like equities. The abundance of liquidity is expected to cause volatility in the stock market,” he said.
In the Philippines, the Bangko Sentral ng Pilipinas cut policy rates by 200 basis points in total this year, with overnight reverse repurchase facility currently at 2 percent.
The Cabinet-level Development Budget Coordination Committee (DBCC) is anticipating the Philippine economy to contract by 8.5 percent to 9.5 percent this year as business activities continued to slow down amid the prolonged lockdown measures due to the pandemic. It is worse than the earlier forecast of a 5.5-percent contraction for the GDP.
In the coming years, the DBCC is optimistic that GDP will rise due to relaxation of restrictions. Economic managers expect the economy to grow to 6.5 percent to 7.5 percent in 2021 and 8 percent to 10 percent in 2022.
Image credits: Bernard Testa