Economic managers slash growth forecast to 4%–5% due to stricter quarantines

The Duterte administration’s economic managers further trimmed their economic growth projection for this year due to the reimposition of stricter quarantine measures in light of the threat of the highly contagious coronavirus Delta variant.

In a statement, the Development Budget Coordination Committee (DBCC) said it revised its growth assumptions for 2021 from the 6% to 7% range to 4% to 5% “in light of the reimposition of stricter mobility restrictions in various areas of the country to effectively address the heightened risks brought about by the COVID-19 Delta variant.”

In May, the DBCC—comprised of the chiefs of Budget and Management, Finance, and Socioeconomic Planning—trimmed its economic growth outlook to the 6% to 7% range for this year from 6.5% to 7.5% due to reimposition of enhanced community quarantine in Metro Manila from March 29 to April 11. 

The National Capital Region was placed anew under ECQ from August 6 to 20.

“In the first half of 2021, our careful balancing of COVID-19 and non-COVID-19 risks allowed us to improve GDP growth to 11.8% in second quarter 2021,” the DBCC said.

“Without the present spike, the original growth target of 6% to 7% would have been achievable. However, with the global emergence of the Delta variant, the second half growth outlook was revised downwards to reflect the additional restrictions imposed by the government, which are necessary to curb its spread,” the economic managers said.

The National Economic and Development Authority (NEDA) estimated that the economy stands to lose P150 billion for each week several regions are under stricter quarantine modes: ECQ, modified ECQ, and general community quarantine with heightened restrictions. 

Bumpy recovery, cautious optimism

“This means that the road to full recovery remains bumpy. Considering that our GDP is rising from a period of contraction last year until the first quarter of this year, a positive full-year estimate for 2021 means the economy remains on the path to recovery. Also, the Philippines’ medium- to long-term growth prospects remain bright,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said in a separate statement.

The BSP chief, nevertheless, said there is basis for “cautious optimism,” especially with the accelerated vaccination program.

“Our strategy is to continue managing the risks carefully by imposing granular quarantines, while allowing a vast number of people to earn a living. We will continue to use this period to accelerate the roll-out of the vaccination program,” the DBCC said.

As of August 15, a total of 27.8 million doses have been administered, consisting of 15.2 million and 12.6 million for the first and second dose, respectively.

“Rest assured that we will continue to work closely with the local government units and the private sector to accelerate the country’s vaccination rates,” the economic team said.

Last August 5, the country recorded an all-time high of 710,482 jabs in a day, while in the past week, the total average daily jabs reached more than 475,000.

“At this rate, and with recent vaccine deliveries arriving as scheduled, we are confident that we can inoculate the required number of individuals, particularly in the densely populated areas, by the end of 2021,” the economic managers said.

“We expect that this will significantly reduce the need for wide-scale quarantines, especially in key economic centers where the majority of Filipinos work. In this regard, the DBCC retained its growth targets for 2022 at 7% to 9%, and for 2023 and 2024 at 6% to 7%,” they said.

The DBCC said it will continue to monitor the effects of the Delta variant and the enforcement of community quarantines, and proactively manage the risks to help the economy recover.

“Business and consumer confidence has already started to improve, with private investments and consumption driving growth of the economy in the second quarter of this year. As we vaccinate more Filipinos, business and consumer sentiment will further improve, supporting overall economic growth,” the BSP's Diokno said.

The central bank chief added that the BSP continues to support the economy, having injected over P2.2 trillion into the financial system since the onset of the pandemic.

“We will continue to do what is needed for as long as necessary—until there is hard evidence of full recovery,” Diokno said.

“The BSP, together with the rest of government, is committed to helping bring the Philippine economy back to its pre-pandemic trajectory toward a New Economy that is stronger, more technology-driven, more sustainable, and more inclusive than ever before,” he added. — BM, GMA News