Sun Life PH investments analyst cites important factors for economic recovery

The Philippine economy is expected to improve in 2021 (though not as strong as hoped for) compared to the previous year despite the ongoing pandemic, according to Sun Life Philippines Chief Investments Officer Michael Enriquez.

During the recent Mid-year Market Outlook virtual briefing by the Sun Life Asset Management Company, Inc. (SLAMCI), Enriquez said the country’s gross domestic product (GDP) growth could be at between 3.9% and 7.1%, which was lowered from the original forecast of between 7.5% and 9.7%. The revised projection is still better compared to the actual GDP in 2020, which was at a 9.6% decline due to the impact of Covid-19 lockdowns.

SLAMCI emphasized that the 4.2% economic contraction in the first three months of the year exceeded a forecast 2% decline due to weak consumer spending. However, Enriquez remains confident that 2021 could be a rebound year, though the improvements may not be as strong as originally expected.

The local stock market is also so far among the weakest in performance, though there are signs it could return to good levels by year-end. Recovery is expected to be led by the property, consumer, transport, and telecom industries.

The economic analyst cited two relevant factors affecting an economic recovery—vaccine deployment and release of fiscal stimulus. To be able to achieve sought-after herd immunity in the country, the government must address issues on vaccine distribution delays and the population’s hesitation in getting vaccinated. The government has recently set a November target for the attainment of herd immunity, a goal that is being doubted as vaccine rollout continues at a slow pace.

Thus, Enriquez said it may take up to two years for the national economy to return to pre-pandemic economic growth levels as the economy gets into the path of re-opening.

Meanwhile, the impact of the 2022 elections, Enriquez said, could also be expected in the first half of next year when government spending speeds up. Historically, consumer spending gets stronger prior to elections as government projects pour and election candidates release cash to cover election expenses.