IMF cuts Philippine growth forecasts for 2021, 2022

MANILA – The International Monetary Fund (IMF) has cut its economic outlook for the Philippines this year and in 2022, noting recent developments in domestic output and the resurgence of Covid-19 cases as causes.
In its latest World Economic Outlook report released on October 12, IMF estimated that the country’s gross domestic product (GDP) would grow by 3.2 percent and 6.3 percent in 2021 and 2022, respectively, down from projections in June of 5.4 percent and 7 percent.

The full-year forecast for 2021 is lower than the government’s revised 4- to 5-percentage-point target although it is better than the 9.6-percent decline in 2020. The expected growth rate for 2022 is lower than the government’s goal of 7 to 9 percent.

“The sizable reduction in the forecast for real GDP growth in 2021 to 3.2 percent reflects two main factors,” said Thomas Helbling, IMF assistant director, chief of A4 Division, and mission chief for Indonesia and the Philippines and reported by Manila media.
First, he said that real GDP growth in the second quarter of the year was lower than the IMF staff had estimated. On a seasonally adjusted basis, it fell by 1.3 percent quarter-on-quarter instead of increasing by 0.5 percent quarter-on-quarter.

“This outcome seems to reflect a stronger negative impact of the second Covid-19 wave,” Helbling highlighted.

Second, due to a third wave of Covid-19 starting in August and heightened uncertainty, he said, the economic recovery in the second half of the year is expected to be slower than previously anticipate.
Continued policy support, vaccine rollout and global growth, according to the IMF official, will underpin a stronger economic rebound next year.
“The economic recovery in the second half of 2021 is expected to be slower than previously expected, due to a third wave of coronavirus disease 2019 (COVID-19) starting from August and increased uncertainty,” said Helbling.

Mr. Helbling also attributed the IMF’s more pessimistic outlook on the Philippines to a weaker-than-anticipated recovery.

Second-quarter GDP grew by 11.8% year on year, bringing average growth to 3.7% in the first half.
“Real GDP growth in second quarter of 2021 was weaker than expected by IMF staff. Instead of increasing by 0.5% (quarter on quarter, on a seasonally adjusted basis), it declined by 1.3%. This outcome seems to reflect a stronger negative impact of the second COVID-19 wave,” he said.

The mechanical impact of the poorer economic rebound in 2021 is reflected in the downward revision of real GDP growth to 6.3 percent in 2022 from 7 percent earlier, he emphasized.

“Progress in the vaccination program and continued monetary and fiscal policy support will be central to the economic recovery in the near term. A stronger global economy will be another crucial element to the economic recovery,” Helbling noted.

The country’s economic managers have previously stated that safe reopening of the economy, limiting restrictions to granular lockdowns and speeding up the vaccination program are all critical to recovery.

The number of Covid-19 cases has decreased by roughly 15 percent since the high on Sept. 11, 2021, based on a seven-day moving average. Furthermore, they revealed that as of September 27 this year, 23.8 million Filipinos had received their first vaccine dosage and 20.6 million had been fully immunized.

“With further vaccine deliveries in the coming months, we are ready to scale up the inoculation drive. We have already proven that we can quickly administer the shots to our people,” the economic managers stressed.

Furthermore, they anticipate pharmaceutical companies delivering over 125 million doses by the end of the year. In addition, the government is prepared to immunize kids aged 12 to 17, which would assist the pilot face-to-face lessons in low-risk locations.