Two-week lockdown in Manila? More like two months, Nomura report warns

THE latest Covid-19 lockdown around the Philippine capital of Manila is not helping the economy, Nomura analysts warned on Thursday, after President Rodrigo Duterte's overnight extension of the "modified enhanced community quarantine".

Economists Euben Paracuelles and Rangga Cipta have reiterated their forecast of a 5.5 per cent gross domestic product (GDP) rebound, down from an earlier estimate of 6.8 per cent.

"The main rationales for our more cautious view include the significant economic impact of the lockdowns (even if less stringent than last year), the fragile starting point with unemployment rates rising again, limited prospects for a sizeable fiscal support package, and monetary policy that is hamstrung by inflation risks," they wrote in a report.

The Asian Development Bank (ADB) had published an even more cautious outlook on Wednesday, projecting GDP growth of just 4.5 per cent in 2021.

"The forecast comes with downside risks," the ADB added, citing factors such as the uncertain course of the pandemic and the danger of virus mutations, which could affect the economic recovery and drag on confidence.

Non-essential travel and gatherings are prohibited in Metro Manila and Bulacan, Rizal, Laguna and Cavite provinces for an extra fortnight from May 1.

But the Nomura team thinks that the regional lockdown - which has been in place since end-March - could stretch on for another one to two months, "as two weeks are unlikely to sufficiently bring down cases and ease hospital occupancy rates to safer levels".

This comes as the analysts also cited how the Philippines' vaccine roll-out has lagged the rest of South-east Asia, which they said is "leaving the country susceptible to recurring waves of Covid-19 outbreaks throughout the year".

The ADB warned that a slow pick-up raises the risk of rising unemployment, even after GDP returns to growth: "Reforms will therefore be crucial to mitigate these impacts and to adapt to structural changes in the labour market."