MANILA, Philippines — Multilateral lender International Monetary Fund (IMF) said the recovery of the Philippines from the pandemic-induced recession is likely to continue in the second half until next year on the back of substantial policy support and stronger global economy.
In a webinar organized by the Philippine Economic Society of the Philippines, IMF resident representative to the Philippines Yongzheng Yang said the Philippine economy may expand by 5.4 percent this year and seven percent next year after a record 9.6 percent contraction in 2020.
“The economy is gradually recovering after a major pandemic-related downturn in 2020. The rebound is expected to continue in the second half of 2021 and in 2022 with an improving situation, substantial economic policy support and a stronger global economy,” Yang said.
Yang told the forum titled “Navigating the pandemic in the Philippines: Outlook, risks and policies” the current forecast of the IMF incorporates a long economic impact of the pandemic.
Yang said the impact of containment measures on economic activity is more muted this year compared to last year.
“(There) is some slowing in economic activity in the first half relative to expectations in early 2021 because of the second wave. Vaccination program is expected to accelerate in the second half,” Yang said.
Yang said the risks to the near-term economic outlook are larger than usual and tilted to the downside, prompting the IMF to continue monitoring the situation in the Philippines closely.
“I think the team is closely monitoring what’s going on, what are the implications for economic policy and of course the economic activity. It is a significant risk,” Yang explained.
Yang said the IMF would look at the impact on mobility, Purchasing Managers’ Index (PMI), and other indicators in case the hard lockdown and containment measures in NCR and nearby areas are extended further.
“The recovery will need to be nurtured, given important downside risks, including current infection uptick. The possibility of a protracted pandemic and vaccine program uncertainty are a particular concern,” the IMF official said.
Yang also said more households and companies could face exhausted buffers as a result of income losses, corresponding to higher risks to asset quality of Philippine banks.
He said there is a need for more support for businesses and households most affected by the COVID-19 pandemic, while structural reforms such as the passage of amendments to the Retail Trade Law, Foreign Investments Act, and the Public Sector Act.
He also cited the need for the effective implementation of Republic Act 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
“There is a need to rekindle investment and return to pre-pandemic rates of economic growth,” Yang said.
He also emphasized the need to strengthen public service delivery in social assistance, health, and education; continue support for climate change adaption; and developing a comprehensive strategy to promote investment in renewable energy and energy efficiency.
In terms of support from the Bangko Sentral ng Pilipinas (BSP), Yang said the country needs to maintain an accommodative monetary policy stance until the economy fully recovers from the impact of the pandemic.