MANILA, Philippines – The gap between the Philippines’ economic growth amid the protracted COVID-19 crisis and its pre-pandemic potential was the widest in Asean-5, with the job recovery remaining weak, a the Asian Development Bank (ADB) said on Thursday. . 20).
The Manila-based AfDB and think tank Moody’s Analytics also flagged the risks associated with the current surge in COVID-19 cases due to the Omicron strain, which could add pressure on weak health systems like that of Philippines.
Data presented by AfDB Senior Economist James Villafuerte showed that before the COVID-19 pandemic, the Philippines’ economic growth averaged 6.4% from 2009 to 2019, the fastest in ASEAN. -5 which also included Indonesia, Malaysia, Singapore and Thailand.
Initial findings from the AfDB’s Country Assessment Report on COVID-19 in Southeast Asia showed that despite expectations of gross domestic product (GDP) growth of 5.1% in 2021 and 6% in 2022, the Philippines’ projected growth rates after its record recession of 9.6% in 2020 saw the biggest deviations from pre-pandemic trends in Asean-5.
The projected level of output in 2021 was 16.1% below pre-pandemic potential, while this year’s GDP would be 16.4% lower, according to AfDB estimates.
Across Asean-5, total GDP this year is expected to be 10.8% below pre-pandemic potential. While production from all five countries would be below trend, the other four were estimated to have smaller gaps than the Philippines: Indonesia, 9.1%; Malaysia, 11.3%; Singapore, 8.9%; and Thailand, 11.4%.
The AfDB’s scenario analyzes showed that across Southeast Asia, projected growth rates for 2022 were sensitive to COVID-19 behavior and health policy interventions.
In the case of the Philippines, a worse COVID-19 outbreak could reduce GDP growth by 0.4 percentage point (ppt), while another 1.1 percentage point could be added to this year’s growth rate if health policies were slowing infections.
“With the continued spread of the Omicron variant, there is urgent concern that the economic recovery expected in 2022 may in fact be stalled, with the emergence of the new wave of COVID-19 infections we are now seeing in January” , said Villafuerte. noted.
In a separate report, Stephen Cochrane, chief economist for Asia-Pacific at Moody’s Analytics, noted that “so far, large increases in COVID-19 cases driven by the Omicron wave are evident in Australia and the United States. Philippines”.
In the Philippines, Metro Manila and areas representing more than half of the economy have been placed under tighter Alert Level 3 restrictions until the end of January. “Domestic demand would be hit first by any return to movement restrictions, and Google mobility data indicates this is starting to be felt in the Philippines and Thailand, where declines in mobility for domestic sales. retail and leisure fell most sharply in mid-January,” Cochrane said.
Still, Cochrane said the slower mobility this month was even better than Q3 2021 when the Philippines and Thailand experienced their Delta waves.
For Cochrane, “the risks of further domestic movement restrictions that could hamper near-term growth are concentrated in Indonesia and the Philippines, where public health services are less extensive and vaccination rates remain relatively low.”
Moody’s Analytics has forecast Philippines GDP growth of 4.7% in 2021 and 5.6% this year. Its forecast was below government targets of 5-5.5% in 2021 and 7-9% in 2022.
The think tank also forecast still high unemployment rates of 7.7% at the end of 2021 and 6.9% this year.
The AfDB’s preliminary report highlighted a “pandemic shock” to the Philippines’ labor market, citing “long-term negative impacts on employment even after the economy began to rebound.”
Villafuerte noted that unemployment remained above the long-term trend — the pandemic unemployment rate of 6.5% in November 2021 remained above the pre-pandemic average of 5.5%.
It hasn’t helped that workers — especially among the most vulnerable sectors like youth, women, the low-skilled and the elderly — have turned to mostly informal or “precarious” jobs, Villafuerte said. .
Dulce Zara, senior regional cooperation officer at the AfDB, said labor market scarring in the Philippines can happen in three ways:
- A high number of job seekers, who had lost their jobs due to the pandemic, as well as new entrants after graduating or dropping out of school
- Reallocation of job losses, especially in sectors dependent on physical contact, which may lead to further skills mismatches
- Digital skills driven by new jobs in work-from-home arrangements that may not be accessible to the current generation of workers.
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