ANZ Research on Wednesday maintained its 4.8-percent 2021 Philippine economic growth outlook, noting that the slow vaccine rollout makes the economy susceptible to a surge in coronavirus disease 2019 (Covid-19) cases, which will result in tighter quarantine measures.

"We maintain our bearish outlook for the Philippines as a host of factors, including employment, lackluster credit growth, and weak sentiment, impedes a quick recovery in 2021," ANZ Research said in a report.

"Although movement restrictions have been relaxed since May as the second coronavirus wave subsided, high frequency and real time indicators show that the economy is still stuck in a rut," it added.

ANZ said unemployment which hit 8.7 percent in the second quarter continued to be elevated while underemployment went up to 17.2 percent from 15.9 percent in the first quarter, which it said "highlights a shortage of quality jobs."

"Household savings have also diminished, with only a quarter of surveyed households having any savings. This means that there is unlikely to be a near-term significant boost to economic activity from an unleashing of pent-up demand even after mobility curbs are lifted," it said.

ANZ said the slow vaccine rollout also makes the economy susceptible to virus resurgences and further mobility curbs.

"Less than 2 percent of the population has been fully vaccinated, which is among the lowest in the region," said ANZ.

Latest data showed that as of June 20 2021, a total of 8.407 million doses have already been administered, while 6.253 million have received their first dose while 2.154 million have completed the required two doses.

ANZ Research, however, said inflation will likely soften in the coming months as supply-side bottlenecks start to ease and the recent pork import tariff cuts lower food prices.

"The report said rising crude oil prices remain a threat but even so, the bulk of the increase is now behind us. We see headline CPI (consumer price index) gradually gravitate into the central bank's target range of 2 to 4 percent," it said.

Monetary policy

The budget deficit is expected to hit 7.8 percent of gross domestic product for this year, "a level which can be afforded for now," according to ANZ.

In terms of monetary policy, ANZ said the Bangko Sentral ng Pilipinas is expected to focus on liquidity this year.

"As such, we expect policy accommodation to stay at least until mid-2022 following which the policy rate is likely to be raised gradually," said ANZ.

The peso, meanwhile, is expected to soften to P48.5 per US dollar this year and further depreciate to P49.5 next year when the recovery in domestic demand becomes full-bodied.

"Although the peso is richly valued on a real effective basis, it is supported by a strong balance of payments position. Intervention by the central bank, though present, has not been particularly aggressive, possibly with the intent to limit imported inflation. That said, we do believe that peso strength has now peaked due to a lower current account surplus," said ANZ.

"For this year, we will, however, monitor the government's infrastructure spending, a key driver of imports. Should it falter like in 2020, the outcome may well be a larger-than-anticipated current account surplus and a stronger peso," it added.