The Philippine economy, battered by the year-long pandemic, faces a positive outlook for 2021 because “essential elements” are in place for a much-needed rebound.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said multilateral agencies forecast a 6.6% economic growth by yearend, following a 9.5% contraction last year.
The national government earlier gave a 6.5% to 7.5% projected growth for 2021. Foreign analysts gave a higher forecast of 6.1% to as high as 9.6%, said Diokno.
Indicators have shown “the Philippine economy has the essential elements to post a strong recovery this year.” The rise in quarterly gross domestic product is one such indicator.
Diokno said the economy posted a moderate decline – 11.4% in the 3rd quarter against 8.3% in the 4th quarter – attributed to the reallocation of resources to sectors that needed most assistance.
“This is expected to continue in the succeeding quarters of 2021 with the calibrated reopening of businesses and mass transportation, the relaxation of age group restrictions, and the planned roll out of Covid-19 vaccines,” the BSP chief said.
Consumer and business confidence also posted encouraging numbers. Business confidence index for the next 12 months increased to 57.7% from the previous quarter’s 37.5 %. Consumer confidence remained positive at 23.6%.
Meanwhile, the BSP’s January survey of private sector economists showed a mean inflation forecast for 2021 of 3.4%, up from 3.0% in December 2020.
“Analysts expect inflation to remain benign and within the target. Their assessment of risks to the inflation outlook is tilted to the upside owing to supply disruptions and improvement in domestic demand,” Diokno said.
He added that the balance of payments position posted an all-time high surplus of $16.02 billion in 2020, providing “another source of optimism.”
The country can tap international financing inasmuch as foreign obligations carry fixed interest rates, unaffected by foreign exchange fluctuations, Diokno said.
He said, “The capital and liquidity buffers that the Philippine banks built in compliance with the BSP regulatory requirements and years of favorable banking conditions proved to be useful.”
In the midst of the pandemic, high levels of bad debt has remained manageable, with nonperforming loans and nonperforming assets at 3.1% and 2.1%, respectively, by end-2020, the BSP Governor added.
Diokno and Finance Secretary Carlos Dominguez III have been credited largely for the country’s strong economic and fiscal fundamentals.
Dominguez said the government could fulfill its funding requirements for this year.
“The large structural liquidity of our financial system will enable us to continue prioritizing domestic financing to mitigate the build-up of foreign exchange risks,” added Dominguez.