Fitch Solutions has revised upwards its 2021 growth forecast for the Philippines following the higher-than-expected domestic output in the third quarter of this year but slashed its next year’s projection because of remaining risks.
In a report, the unit of Fitch Group now projects the domestic economy to grow this year by 4.5 percent, from 4.2 percent earlier, and by 6.5 percent next year, from 6.8 percent.
This, after the gross domestic product (GDP) expanded by 7.1 percent in the third quarter, which surpassed expectations.
To date, the domestic economy’s average output stood at 4.9 percent, within the government’s 4 percent to 5-percent target band for the year.
Fitch Solutions said the economy grew by 3.8 percent quarter-on-quarter from July to September this year due to the easing of movement restrictions.
The government placed Metro Manila, which accounts for around 70 percent 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, due to another surge in coronavirus disease 2019 (Covid-19) because of the Delta variant.
“A gradual relaxing of domestic mobility restrictions and continued support measures from policymakers helped propel activity, bringing the economy closer to its pre-pandemic output levels,” the report said.
Fitch Solutions said there are signs of a continued recovery in the fourth quarter, with mobility data signaling an increase in domestic activity and vaccination rates rising in the key economic hub of Manila.
However, it said the country “remains vulnerable to Covid-19 outbreaks given disparities between regional vaccination rollouts and the lower efficacy rates of the vaccines administered.”
“As of October 21, only 22.6 percent of the population had been fully vaccinated and the lower efficacy of the vaccines being used could mean that there is a greater need for booster shots. Thus, in the near term, further disruptions could weigh on the pace of the economic recovery, and the prospects of a revival in the country’s tourism sector remain dim,” the report said.
It added that “while we expect economic growth to increase further in 2022, remaining challenges will stop the Philippine economy returning to its pre-pandemic growth trajectory.”