COVER STORY

PH economy and business in 2021: Slow, fragile recovery

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Metro Manila (CNN Philippines, December 17) — A rebound is underway for the Philippine economy and local businesses alike this 2021, but still not at full speed.

With COVID-19 restrictions relatively looser than those imposed last year, more businesses and workers were able to get back on their feet and recover slowly from the losses incurred.

Growth also swung to positive territory in the second quarter, effectively lifting the country out of recession. The economy expanded by 4.9% on average as of end-September, on track with the higher target band forecasted by President Rodrigo Duterte's economic team.

'Partial, considerable' comeback

While economists acknowledged the Philippine economy fared better this time around than last year, they also noted barriers standing in the way of full recovery.

"I would say that 2021 was a year of step forward and back and forward again. It sounds funny, but it is so true," Union Bank of the Philippines chief economist Ruben Carlo Asuncion told CNN Philippines.

Lockdowns returned twice this year: in late March, due to the surge in fresh infections driven by the Alpha and Beta variants, and in August, as authorities aimed to quash the wave of infections caused by the Delta variant. Other than that, Filipinos dealt with restrictions relatively more lax compared to 2020.

"Clearly, the Philippine economy was battered by Covid once again in 2021, but the recovery is also showing itself here and there. Fragile, but considerable," Asuncion said.

For Bank of the Philippine Islands lead economist Jun Neri, this year is one of a "partial" rebound for output and "sustained underperformance" versus the country's ASEAN peers.

"Recovery is partial since our output in the last 4 quarters is still 6% below 2019 output while our neighbors are either above or already close to 100%," Neri said.

While both economists noted that trade and manufacturing figures are now back to pre-pandemic levels, they cautioned that investments are still lagging — with investors still mostly on the sidelines amid the pandemic.

The Duterte administration has employed multiple ways to woo fresh capital, signing into law the likes of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. The Senate has also passed on final reading key economic measures amending the Foreign Investments Act and Public Service Act

Other measures certified urgent by the chief executive also secured his signature, such as the Financial Institutions Strategic Transfer (FIST) Act, which gives banks leeway to dispose of bad assets, and a law further regulating the taxation of Philippine Offshore Gaming Operators or POGOs.

Consumers, meanwhile, had to deal with skyrocketing commodity prices: inflation has accelerated by 4.5% on average this year due to rising food and energy costs — coupled with bottlenecks in global supply chains.

RELATED: BSP keeps interest rates unchanged at record 2% low for entire 2021 

Sectors in the green, red

Local business analysts stress that COVID-19 is here to stay — with its level of distraction ruling different sectors' capacity to recover at full throttle.

Philstocks Financial Senior Supervisor for Research Japhet Tantiangco considered existing telco players — Converge ICT, Solutions, Inc., Globe Telecom, Inc., and PLDT, Inc. — as the big gainers as they have so far recorded blockbuster financial performances this year.

This, as the government — for almost two years now — continued to impose limitations on the movement of people, forcing them to stay online, either for work or studies.

Globe and PLDT are both optimistic of maintaining their dominance, with the former now starting to explore digital businesses outside the telco. Both groups' mobile wallets, GCash and PayMaya, have also witnessed their strongest traction yet as Filipinos embrace digital payments.

RELATED: Globe rebounds to pre-pandemic levels, explores new revenue sources beyond telco

RELATED: PLDT 'on track' to meet 2021 core earnings target

"The large telco companies are among the biggest winners amid increased valuation brought about by the increased demand for telecommunication/data/mobile services as well as digital wallet services as the pandemic since last year accelerated the digitalization of businesses, work, education/schooling, and other transactions/processes," RCBC chief economist Michael Ricafort told CNN Philippines.

Meanwhile, for the first time, Dennis Anthony Uy of fiber internet provider Converge ICT joined the Forbes richest list after the company went public and gained from the strong demand for connectivity amid the pandemic.

RELATED: Converge 9-month earnings hit ₱5.19B as subscriber base grows

Companies engaged in providing electricity — including renewable energy — are also the biggest winners, according to Tantiangco.

"Our energy players can also be considered as big gainers this year amid the recovering energy demand coupled with the tight supply which led to higher energy prices. This can be seen in the revenue performance of Aboitiz Power Corporation, AC Energy Corporation, and First Gen Corporation," he said.

However, businesses tied to the tourism sector continue to reel from the COVID-19 shock.

"These include the air transportation sector as seen with the financial performance of PAL Holdings, Inc. and Cebu Air, Inc., and the gaming sector as seen in the financial performance of Bloomberry Resorts Corporation," Tantiangco noted.

Although they have started seeing signs of recovery, local airlines remain in the red.

READ: PAL confident to exit rehab plan within the year, hit pre-pandemic levels by 2024-2025

COVID-19 to still rule future developments

Both authorities and analysts have turned bullish on the country's growth prospects this year — with economic managers pegging full-year growth within 5-5.5%.

"We are looking at around 5.6% year-on-year growth print or better for the fourth quarter of 2021 on the major easing of quarantine restrictions as cases and death rates fall even before attaining herd immunity," Neri said.

Asuncion, on the other hand, sees output expanding by at least 5.5% in the last three months of the year — yielding a minimum average growth of 5.2% for the entire 2021.

But it's a different picture for 2022 and beyond.

The Philippine economic and business outlook is much shrouded with uncertainty as the specter of COVID-19 lingers, especially with the discovery of more transmissible variants like Omicron.

RELATED: PH detects first 2 imported cases of Omicron variant 

"Major factors to look out for would be vaccination rates and boosters as well, to basically fight against new variants. Plus, the potential resurgence of the virus in early 2022 is something I am not counting out or taking for granted," Asuncion stressed.

Tantiangco said the country's medium-term economic prospects have seen improvements but they are still "plagued with risks," stressing there still isn't a clear picture on how lethal the new variant is.

"[I]f the said variant or if there would be any variants in the future that could cause a Delta-like setback for the world, then the global economy could weaken again which in turn would negatively affect our foreign trade and investments," he explained.

Outside the Philippines, Asuncion said China's economic growth especially amid corporate turmoil in sectors like real estate, along with the United States Federal Reserve's future moves and monetary policy must be on the top of things to watch out for.