The country’s economic recovery will depend on how fast and effective the government will be able to roll out its vaccination program, First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said.

In their latest issue of “The Market Call,” FMIC and UA&P said that while some “green shots” sprouted that include the slight increase in tax revenues of the Bureau of Internal Revenue (BIR) and continued expansion of the manufacturing purchasing managers index that boosted optimism on recovery, the recovery pace would largely depend on how fast the vaccination against the coronavirus disease 2019 (Covid-19) would be implemented.

“The stirrings of good recovery from the most recent economic data provide a bit more of optimism, albeit tempered by some cautiousness,” the report said.

“The pace of economic recovery, however, will depend on how fast vaccines rollout, more effective medications are acquired, and firms rebuild supply chains and boost output and employment,” FMIC and UA&P added.

The Philippine economy contracted by 9.5 percent last year as a result of the quarantine measures imposed to curtail the spread of Covid-19.

Due to the rising number of Covid-19 cases, the government imposed a week-long enhanced community quarantine (ECQ) in Metro Manila and four nearby provinces.

FMIC and UA&P said the increase in the number of cases and the imposition of ECQ may make consumers more wary about spending especially in restaurants or parties at home.

“Consumers also may like to see a sharp fall from the recent spike in Covid-19 cases before going on a spending spree,” they said.

FMIC and UA&P meanwhile, said, the Bangko Sentral ng Pilipinas (BSP) will likely maintain policy rates due to high inflation.

“We think that BSP will not have an appetite for a further rate cut given high inflation rates. However, it may do just that should the new ECQ in Metro Manila+ slows the economy significantly,” they said, referring to the metropolis and the four provinces where the ECQ is in effect until April 4, 2021.

FMIC and UA&P project inflation to settle at 4.9 percent in March and may start to taper off by April.

“The report of more hog production and lower vegetable prices do not guarantee an immediate impact, as logistics issues remain. That crude oil prices seem to have hit a peak in March would likely impede further acceleration of inflation, but they remain elevated compared to year ago levels,” they said.

“Inflation should clearly slow down by Q3 (third quarter) when food production would have normalized more and crude oil prices expected to fall starting May as the US Energy Information Administration projects. Indeed, the oil futures market has begun to reflect that as US oil production has shown mild upticks (for now) with shale oil producers getting back into the scene as reflected by increasingly higher rig counts,” they added.