UK think tank: Delta variant 'unlikely' to hurt PH growth until Q4

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Metro Manila (CNN Philippines, July 20) — The Philippine economy may only feel the impact of the highly transmissible Delta variant in the last quarter of the year, a United Kingdom-based think tank projects.

"In all, the Delta pinch on the Philippine economy is unlikely to be felt until Q4," said Pantheon Macroeconomics senior Asia economist Miguel Chanco in a research note published Tuesday.

Among the factors listed are the country's mobility levels, which remain subdued amid ongoing quarantine restrictions. Main economic hub Metro Manila only shifted to regular general community quarantine in mid-July after months of tighter lockdown measures along with neighboring provinces.

"When the variant was first spotted in Indonesia in April about two months before cases went parabolic, trips to retail and recreation venues were 14% below the pre-pandemic norm, higher than the current -22% print for the Philippines," the note read.

The Delta variant, which was first discovered in India, is considered the driver of the surge in COVID-19 infections in the East Asian giant along with Indonesia.

Chanco also flagged the hampered consumer confidence that persists amid strict quarantine rules and virus fears.

"To be clear, the outlook for domestic demand in the Philippines in the remainder of this year would have been extremely challenging anyway, with or without the Delta variant," he said.

The think tank cited the confidence index from the latest consumer expectations survey of the Bangko Sentral ng Pilipinas, wherein it eased to -30.9 in the second quarter from -34.7 the quarter prior.

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A negative confidence index means pessimists outnumber optimists.

"[I]t remains more than 30 points below the pre-virus level, and it still isn't rising fast enough for households to open their wallets," explained the economist

He also mentioned the lower outturn in consumers willing to spend on major items like vehicles and property from April to June, along with the "rebuilding of savings following last year's drawdown" which keeps holding back private expenditures.

The Philippine economy remains in a recession this 2021, with gross domestic product shrinking by 4.2% from January to March.

Researchers previously warned COVID-19 cases might surge anew in the country if the Delta variant spreads in the capital region.