What lies behind the pandemic endgame financially?

THE annual economic forum, led by The Manila Times (TMT), attempted to pierce the veil of uncertainty thrown up by the question of economic forecasts, with sharp and incisive insights from keynote speakers from the Central Bank of the Philippines, the Asian Development Bank (ADB) and from the World Bank and representatives from the securities services and financial technology industries.

The 2022 Outlook: Looking beyond the pandemic endgame virtual event on March 1, 2022 was livestreamed on TMT’s social media platforms and hosted by TMT’s Chairman and Chief Executive Officer, Dante “Klink” Ang 2nd and the Columnist Ben Kritz moderated.

Run to the ground

Benjamin Diokno, Governor of Bangko Sentral ng Pilipinas, described the situation on the ground: After five consecutive quarters of decline, the Philippine economy recovered strongly in the second quarter of 2021, with growth of 12 percent.

Since then, the country has managed to sustain that growth amid the government’s calibrated approach to containing the coronavirus. In the fourth quarter of last year, the economy grew by 7.7 percent, which corresponds to a total annual growth of 5.6 percent. Gross domestic product (GDP) growth for the full year exceeded the government’s target range of 5 to 5.5 percent GDP growth for the year, beating market expectations.

Quarterly growth in the Philippines has improved for the past two consecutive quarters, bringing the economy closer to pre-pandemic levels seen in the final quarter of 2019, according to Philippine Stock Exchange data he cited.

The GNP governor also announced that the employment situation had improved as the unemployment rate fell to 6.6 percent in December 2021, compared with the peak of 17.6 percent in April 2020. Employment hit 46.3 last December million, representing a net job gain of 3.8 million before the pandemic in January 2020. However, he acknowledged that employment in sectors requiring close contact has yet to recover, particularly in the accommodation, catering and transport sectors.

After providing an update on national economic performance, he discussed the support GNP was providing to ensure a strong, stable recovery and opened with an outlook for the years to come.

Nailed it

Ndiame Diop, World Bank country director for Brunei, Malaysia, Thailand and the Philippines, hit the nail on the head when he immediately spoke about Ukraine and how the war, in addition to the ongoing global health and financial crisis, is affecting economies around the world afflicted world, especially in Southeast Asia.

He then stepped down and constructed the economic backdrop of the past two years against which the current geopolitical and financial game has been staged. While not exactly a black swan, contagion with the coronavirus was certainly a scene-stealing act in the unfolding tragedy that caused global growth to drop by 3 percent in 2020, resulting in millions of dollars in lost jobs and income and global poverty increased for the first time in two decades. However, the following year saw a remarkable recovery of 5.5 percent, fueled by the easing of mobility restrictions and pent-up consumer demand, supported by fiscal and monetary stimulus around the world.

Disclosing the latest global economic outlook released by the World Bank, Diop revealed the projected slowdown in global growth from 5.5 percent to 4.1 percent in 2022 and 3.2 percent in 2023 amid easing of pent-up demand and global unraveling of monetary support. Among emerging and developing economies, growth was observed to slow from 6.3 percent in 2021 to 4.6 in 2022 and 4.4 in 2023. This meant that many emerging and developing economies would not return to their pre-pandemic levels by next year. More importantly, the report emphasized that the slowdown could become more relevant with possible future virus outbreaks, rising global inflation, or even financial strains from rising interest rates in advanced economies.

Share optimism for emerging markets

On the other hand, Kelly Bird, country director of the Philippine office of the ADB’s Southeast Asia division, shared Gov. Diokno’s optimism for the Philippine economy.

He mentioned the factors that enabled the country’s return to previous high growth rates: the structural reform policies implemented over the past 12 months, such as the Enterprise Recovery Law and corporate tax incentives, which would boost private investment in the years to come; the government’s immunization program with nearly 68 million doubly vaccinated Filipinos; public spending on infrastructure at over 5 percent of GDP; and monetary policy, which has remained suitably accommodative to boost spending and private investment.

The ADB country director also explained why last year’s solid growth rate led to the ADB forecast being raised to 6 percent this year and to over 6 percent for 2023 as a conservative estimate. He underscored the need to sustain infrastructure spending to meet those projections.

At the same time, he reiterated the World Bank’s country director’s caveat that new and more dangerous variants of Covid-19 and the resulting supply chain disruptions and spiking inflation could potentially prolong the endgame.

He then spoke about ADB’s innovative and transformative programs for the Philippines in 2022.

Gaining digital insights for transformative growth

Speaking of innovation, Digitalinnov’s President and Chief Executive Officer, Milo Sandig, has uncovered digital insights into pandemic behavior that supported transformative growth.

With a total population of 111.8 million with an urbanization of 48 percent; 156.5 million mobile subscriptions in 140 percent of the population; 76.01 million Internet users in 68 percent of the population; and 92.05 million active social media users, accounting for 82.4 percent of the population in February 2022, Sandig emphasized that there are more mobile phones in the Philippines than Filipinos and that the median age of users is 26.3 years old. He said they spent 10 hours and 27 minutes a day online compared to 3 hours and 30 minutes a day in front of the TV. He noted that Filipinos have more access to the grid than roads, drinking water and electricity. They engaged most with video content on Google, Facebook, YouTube, and Shopee.

Despite lockdowns and restrictions, Sandig has indicated that it was these that supported 43.31 million internet users who made a total of $16.79 billion in online consumer goods purchases annually.

Hold the same position, one notch above

Aftab Ahmed, Country Officer, Country Head and Managing Director of Citi Philippines, reiterated that the country’s macroeconomic indicators remained strong; that the ratings remained unchanged and continued to be one notch above the investment rate of three rating agencies; and that various business areas were either doing well or on the road to recovery.

He said high growth potential, modest government debt and a stable and resilient banking system contributed to these strong fundamentals. These are commendable, he argued, considering the three agencies collectively downgraded the ratings of 48 countries between January 2020 and March 2021, but the Philippines retained the same standing.

Ahmed said that Filipino workers’ remittances abroad and business process outsourcing inflows, at $31 billion each, grew by 5 percent and 10 percent, respectively.

To summarize the outlook for 2022 and beyond, with the Philippines’ macroeconomic fundamentals remaining well entrenched, leading economic managers have deemed it prudent to pursue accommodative policies in the face of manageable inflation and rising global uncertainties. They warned against cultivating a balance between appropriate economic stimulus and reducing the build-up of risks to price and financial stability. The Philippines weren’t out of the woods yet, so to speak, but they could finally see the wood for the trees. Money trees were already growing beyond the pandemic endgame.