The economic outlook in the Philippines has gone from bad to worse over the past month. The main headwind is a renewed surge in virus infections, with the country now reporting around 10,000 new cases of COVID-19 each day. Metro Manila, which accounts for 40% of GDP, has been placed under a strict lockdown for a week. Even before the latest surge in cases, there were signs of the recovery going into reverse. The first monthly edition of the Labour Force Survey showed that the unemployment rate crept up from 8.7% in January to 8.8% in February, compared with just 4.6% before the crisis. High inflation, which reached 4.7% y/y last month, is also starting to eat into the purchasing power of consumers. Fiscal policy is unlikely to plug the gap – spending remained lacklustre in January and February. The country’s slow vaccination rollout will further hold back the recovery. Less than 1% of the population has so far been inoculated. By the end of the year, we think GDP will still be 12% below its pre-crisis trend, which is the biggest gap of any country in the region.
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