Standard Chartered Bank on Friday sees the Philippine economy rebounding only modestly this year as consumption remains soft, warning that the continued rise in coronavirus infections still poses a threat.

“We [only expect] a modest recovery in 2021. We expect growth to have declined [by] 8.9 percent for 2020 [and rebound] only mildly to 6.1 percent in 2021,” Standard Chartered economist Chidu Narayanan told a virtual briefing.

The lender’s growth estimate for this year falls below the government’s official forecast range of 6.5 to 7.5 percent.

GDP could grow year-on-year by 2.1 percent in the first quarter, 15.7 percent in the second, 5.5 percent in the third and 2.4 percent in the fourth, according to Narayanan.

“Private investment is likely to be very subdued for 2021, especially given that one, there is significant overcapacity in the economy at present, given the substantial demand destruction that we’ve seen in 2020; and two, there is also quite a bit of uncertainty about the outlook for demand over the next 12 to 18 months,” the economist said.

There is no clarity among corporates on how much more demand would pick up this year, and how much more they need to invest, he noted.

Narayanan said the forecast highlighted the need for the government to boost its fiscal support to ensure recovery.

“So the onus of not just pushing up growth, but also ensuring that sentiment rebounds is in fiscal spending. That is why we think that fiscal spending this year will be absolutely paramount to ensure that growth comes back up to the 6-percent level over the medium term,” he added.

In particular, he said, the bulk of the legwork for this year in terms of accelerating growth is hinged on the government’s “Build, Build, Build” infrastructure program. Of the P4.5-trillion 2021 national budget, P1.1 trillion, or 5.4 percent of the country’s GDP, was allotted to the program.

It is unlikely that economic growth would return to its pre-coronavirus pandemic level this year, he added.

“When you think of the earliest can the Philippines return to pre-Covid GDP levels, we expect that [this would not be] happening in 2021. We expect that returning to pre-Covid GDP levels… will happen only in 2022,” he said.

Narayanan warned that one factor that could keep consumption weak is the still-high number of Covid-19 cases in the Philippines and overseas.

“We have seen an increase in infections, and if that continues and daily infections remain high, that could weigh on sentiment [and] on consumption, as well. It could delay even further the rebound in growth that we are likely to see possibly only by end [of] 2021,” he said.

Still, Narayanan believes remittances from overseas Filipino workers and pent-up demand could provide upside risks for consumption.

He sees growth in remittances to be in the upper end of the 3 to 5 percent range in 2021, given that their inflows had not declined substantially last year.

Latest data showed that these inflows in January to November reached $29.98 billion, a 0.9-percent drop from $30.25 billion in the same period in 2019.

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