Latest Updates on the Situation in the Philippines

By Kaith Medina

Last December 7, 2021, the Nordic Chamber of Commerce (NordCham) of the Philippines) and PSA Philippines Consultancy, Inc. hosted a webinar to give an update on the Philippine situation, which mostly focused on COVID-19 and vaccination. The two speakers, Gregory Wyatt (Director for Business Intelligence, PSA) and Samuel Ramos-Jones (Director for Business Development, PSA) were introduced by Jesper Svenningsen, Executive Director of NordCham Philippines.

Gregory Wyatt started the session by sharing what they currently had on the Omicron variant. That time, it had become a variant of concern because of the rapid increase in cases and its concerning mutations, which resulted in a very steep increase in cases in South Africa, where the variant was initially detected.

On the other hand, the Philippines, despite the weak sequencing and contact tracing, no longer sees a strain in the medical system, both in official data and anecdotal reports from sources. The implemented quarantine in the Philippines was largely effective against the Delta variant, which delayed the surge for six weeks, compared to countries like India, Indonesia, and the United Kingdom. The death toll remains high, but there is a wide agreement that this is due to backlogs. Given this, the DOH started to prepare the healthcare system for the potential surge with Omicron. Compared to other countries, the Philippines has more will for quarantine, which can slow down the entry of a variant, but in case the virus makes it through and the genomic sequencing is still not fast or extensive enough, the country’s contact tracing may not be good enough to break the chains of transmission.

On the brighter side, vaccine supply is no longer an issue, despite it being relatively mandated. The vaccine hesitancy of the country has also improved and, assuming this will continue, 70% of the total population will be vaccinated by early February and 85% by early March. Based on Samuel Ramos-Jones’ report, another good thing to look at is that the Philippines’ GDP growth outlook is improving. In November, Fitch and S&P raised their 2021 GDP growth outlooks to 4.5% and 5%, respectively. The government is now confident that 2021 growth will be within (and possibly surpass) the target of 4%-5%. According to Goldman Sachs, he expects the Philippines to be the second-fastest growing economy among the ASEAN-5 at 4.9%, next to Singapore’s, which is projected at 6.5%. In the same report, he also predicted that the Philippines will be ASEAN-5’s top performer in 2022 with 7.3%.

Inflation in the country is still elevated but decelerating. It was recorded at 4.9% in September and 4.6% in October. November’s inflation was at 4.2%, which was slightly higher than the BSP’s prediction that inflation for the month would fall within government’s 2%-4% target and is also higher than BusinessWorld’s poll of 18 economists (4% median prediction). Through November, it has averaged at 4.45% and would need to be -1% in December for average inflation in the year to still fall within the government’s target. With the current situation, inflation has been felt most significantly in fuel, electricity, and food, leading to out-sized impacts on the Philippines’ consumption-led economy and particularly has regressive effects on lower and middle-income families.

With fears of runaway inflation being largely dispelled, the BSP has doubled down on maintaining its record-low key borrowing rates through the end of the year. According to ING Bank Senior Economist Nicholas Mapa, the surprise pickup in economic growth opened the door for possible interest rate adjustments by the second quarter of 2022. In relation to this, Fitch Solutions expects the BSP to raise interest rates by 75 basis points (0.75%) by year end 2022. However, according to Duncan Tan, in the event that Omicron is actually worse than the Delta strain, India and the Philippines may see some deterioration on the fiscal and debt outlook due to weaker government revenues and the need for extended stimulus in 2022.

It was shared during the session that Finance Secretary Carlos Dominguez III named four key challenges he sees facing the next administration: (1) ballooning domestic debt (2) high global inflation (3) worsening inequality and (4) climate change, but he also gave an assurance that the next presidency will be ably assisted during the transition period. Looking at the current Philippine credit ratings, Fitch, who was the first and so far the only major international credit ratings agency to downgrade its outlook on the Philippines from “stable” to “negative” back in July, signaled that the Philippines may be in for a credit rating downgrade if the country’s debt-to-GDP ratio fails to improve in the medium-term, especially as finances in the rest of the Asia Pacific improve.

The session ended with the Q&A portion and the following key learning points:

• If we continue with the basic low-cost protections and keep vaccinations going, we can possibly avoid a surge, but if we go completely unmasked, have mass gatherings, continue with unfixed ventilation in crowded areas, then we may have another surge like Europe and North America.
• Given the safety protocols our country has been following, if Omicron is as bad as the experts are worried about, we will still have another surge.
• There has been a decrease in cases in the Philippines, which is normal, just like India, Indonesia, and Japan. This decrease may be attributed to vaccinations, together with “common sense” protections like masks, avoiding mass gatherings, and the hybrid work setup (other countries went back to normal too soon).
• Economic recovery is expected by the third quarter of 2022, should there be no surge/new variants, but it can possibly be in the first quarter of 2023 in case of another surge and lockdown.

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About the author:

Kaith is a Psychology graduate from the University of Santo Tomas and a registered Psychometrician. Dancing and anything related to food is both my hobby and passion. I am a dog lover and I enjoy spending my free time with my family and loved ones. I love exploring new things and activities that would make me grow as a person.