ANZ Research on Friday further trimmed its growth forecast for the Philippines next year as it expects its economic recovery from the coronavirus pandemic to face many challenges.
In a report, the Australia-based research company said it now projected the country’s gross domestic product (GDP) to rebound by 8.1 percent in 2021 on the assumption that it would contract by 9.1 percent this year.
The revised forecast is above the government’s official forecast range of 6.5 to 7.5 percent.
“The growth outlook for next year remains clouded by intertwined challenges — weak exports and output, excess capacity, and unemployment,” ANZ Research said.
While electronics account for a large share of the Philippine export basket, it said the country’s inability to move up the value chain meant that it had benefited from the global technology upturn less than its regional peers Malaysia and Vietnam.
Capacity utilization rates are running at multiyear lows, resulting in the proportion of surveyed corporates with plans to expand their operations plunging to its lowest in two decades, the firm added.
Underemployment remained uncomfortably high despite the improvement in the country’s joblessness rate, according to ANZ Research.
Latest data showed that unemployment fell to 8.7 percent in October from 10 percent in July. The underemployment rate — the proportion of employed persons wanting additional work — reached 14.4 percent in the 10th month, better than July’s 17.3 percent but worse than October 2019’s 12.8 percent.
“These labor-market dynamics, alongside volatile remittances and repatriation of overseas workers, have exacerbated the weakness in household consumption, typically the mainstay of overall GDP growth,” ANZ Research said.
The company urged policymakers for “a more forceful” response, noting that the delivery on fiscal stimulus “has been weak.”
“Year-to-date aggregate spending has increased by 12.7 percent [year-on-year] — hardly a panacea for a crisis of this magnitude. Equally important, infrastructure spending, which has a high multiplier on growth, has fallen 16.5 percent [year-on-year] year-to-date,” it said.
ANZ Research hopes the 2022 presidential elections and higher revenues would help revitalize state spending next year.
It said the fast-tracking of around 34 projects under the government’s Build, Build, Build infrastructure program could “lift the construction sector and support the weak labor market.”
“The intent to spend more is underscored by faster disbursements (more than 50 percent) of the allocated P165.5 billion under Bayanihan 2 between October and November this year,” it added.
Formally known as Republic Act 11494, or the “Bayanihan to Recover as One Act,” and signed on September 11, Bayanihan 2 involves interventions that include cash-for-work programs; skills training; social assistance programs; funding for the agriculture, tourism, transportation and education sectors; and more lending programs to help businesses survive. It will expire on December 19.