Better year ahead?

Everyone’s resigned to the fact that 2020 was an extraordinarily bad year for the economy. The latest forecast of the World Bank said that the Philippine economy contracted by 8.1 percent last year due not only to the COVID-19 pandemic but also to the multiple shocks that hit the country — Taal Volcano’s eruption in early 2020, the series of typhoons that devastated agriculture and livelihoods, and the pandemic-induced recession that curbed foreign trade as well as travel and tourism.

The most damaging impact of the economic slump was on employment as businesses either cut cost or closed shop altogether. Official figures show that 4.5 million Filipinos have joined the ranks of the unemployed, pushing the country’s jobless rate to 10.4 percent, the highest in 15 years. Public debt had also swelled to a record P10 trillion as of end-October 2020 as the government faced lower tax revenues because of the decline in corporate profits, while state expenditures ballooned, on the other hand, because of the need to address the health and social impact of the health crisis.

For 2021, economists are in agreement that the economy will likely turn out a better performance. While they differ somewhat on the extent and timeline of recovery, what is common in their forecasts is that much of the growth expectations this year will be due to low-base effects. This means the economy will not be back to its pre-pandemic level anytime soon, but 2021 is still poised to be better than the previous year that everybody wants to forget.

The latest survey conducted by the think tank

Japan Center for Economic Research showed that nine local economists expected the Philippines’ gross domestic product (GDP) to contract by 1.6 percent year-on-year in the first quarter of 2021. But given base effects — the Philippines’ GDP slid the worst at 16.9 percent year-on-year during the second quarter when 75 percent of the economy came to a halt at the height of the region’s strictest COVID-19 lockdown — the second quarter of 2021 will see the economy bouncing back with an 11.2-percent growth. The economists projected a GDP growth of 6.1 percent in the third quarter of 2021, and full-year growth of 5.9 percent, which is below the government’s 6.5-7.5 percent target for next year.

For perspective, other Asian countries like India, Singapore, and Thailand are also expected to post GDP contraction in the first quarter before rebounding.

Global investment banker Goldman Sachs expects economic growth to rebound the most in the Philippines (9.4 percent) and Malaysia (6.6 percent), two countries that were among the hardest hit by virus containment measures last year. That positive projection is because of their growth potential and the anticipated arrival of COVID-19 vaccines. Morgan Stanley is also bullish that the Philippines will post a strong economic rebound of 13.5 percent this year against a backdrop of low inflation, the government’s “Build, build, build” infrastructure development push, and the looming availability of vaccines against COVID-19.

The new year, however, is not without downside risks. Bangko Sentral ng Pilipinas Governor Benjamin Diokno has noted that logistical challenges in the distribution of the vaccine would have to be addressed before the economic recovery can resume. In the near term, uncertainty also remains high following the resurgence of the virus in the United States, Europe, and parts of Asia. The Bangko Sentral official and other economists have warned that any reimposition of lockdowns could further dampen economic recovery this year.

Many things need to come into play for the Philippine economy to recover robustly. The government must spend more on fiscal stimulus programs, private companies need to find ways to continue their businesses while safeguarding their workers’ safety and well-being, and all citizens need to continue to strictly observe basic health and safety protocols, particularly the wearing of face masks and shields, frequent hand-washing, and observing physical distancing.

Many Filipinos remain hopeful despite the pandemic. According to Pulse Asia’s Holiday Season survey last month, nearly all Filipinos have a positive attitude toward 2021; a heartening 91 percent of respondents said they would face the new year with hope. That is perhaps the best foundation for the country to be able to rise above the health crisis and push the economy to do better this 2021.