NextGen Day

Following higher-than-expected domestic output in the third quarter of this year, Fitch Solutions raised its 2021 growth forecast for the Philippines but lowered its forecast for the following year due to persisting concerns.

According to a forecast, the domestic economy will increase by 4.5 percent this year, up from 4.2 percent previously, and by 6.5 percent next year, down from 6.8 percent.

This comes as the third-quarter gross domestic product (GDP) increased by 7.1 percent, above estimates.

To date, the average output of the domestic economy has been 4.9 percent, which is within the government’s target range of 4 percent to 5% for the year.

Due to the loosening of movement restrictions, the economy grew by 3.8 percent quarter-on-quarter from July to September this year, according to Fitch Solutions.

Due to another surge in coronavirus disease 2019 (Covid-19) due to the Delta variant, the government placed Metro Manila, which accounts for roughly 70% of the economy’s annual output, under the strictest quarantine level, the enhanced community quarantine (ECQ), from August 6 to 20, and the modified ECQ in the following weeks.

“A progressive relaxation of internal mobility limitations, as well as continuous policymaker support,” the report stated, “helped push activity, bringing the economy closer to pre-pandemic output levels.”

According to Fitch Solutions, there is evidence of a prolonged recovery in the fourth quarter, with mobility statistics indicating an uptick in domestic activity and vaccination rates climbing in Manila, the country’s most important economic hub.

The country, however, “remains vulnerable to Covid-19 outbreaks due to differences in regional immunization rollouts and lower efficacy rates of the vaccinations delivered,” according to the report.

“On October 21, only 22.6 percent of the population had been properly vaccinated, and the vaccinations’ reduced efficiency could mean that booster shots are required more frequently. As a result, in the near term, more interruptions could slow the rate of economic recovery, and the country’s tourism sector’s prospects remain dismal,” according to the research.

“While we estimate economic growth to pick up in 2022,” the report continued, “remaining obstacles would prevent the Philippine economy from returning to its pre-pandemic growth trajectory.”

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