WITH Luzon — the country’s biggest and most populous island and home to major industries — placed under enhanced community quarantine, the International Monetary Fund (IMF) revised lower its full-year 2020 growth forecast for the Philippines to below 1 percent.
IMF yesterday said real GDP growth in 2020 is now projected to slow down to 0.6 percent.
This is a far cry from its previous full-year forecast of 6.3 percent. This is also below the government’s full-year growth target of between 5.5 percent and 6.5 percent.
Yongzheng Yang, IMF resident representative, said the downward revision of the 2020 growth forecast is “mostly attributable to supply disruptions related to COVID-19 (new coronavirus disease 2019) and weaker demand in the Philippines’ major trading partners.”
“Tighter global financial conditions, weaker public confidence, and lower remittances are also expected to weigh on private consumption and investment,” Yang said.
But Yang stressed the negative impact of COVID-19 are expected to be partially offset by policy support.
“The virus outbreak is assumed to peak in the second quarter of 2020, leading to a gradual recovery in the second half of the year. Growth is projected to rebound from a low 2020 base to 7.6 percent in 2021,” Yang said.
Stemming the spread of COVID-19, Yang stressed, is of utmost importance.
He noted that policies at the moment should focus on “both protecting public health and putting people back to work, but getting the virus under control is, if anything, a prerequisite to saving livelihoods.”
“By acting forcefully now with strong actions to stop the spread of infections, complemented by strong economic policy actions to support people and businesses, the crisis can be ended sooner with less human and economic cost,” Yang said.
Yang said the IMF welcomes the local authorities’ fiscal and monetary policy responses to the impact of COVID-19.
“Owing to prudent macroeconomic management, the Philippines has built considerable policy buffers in recent years, and both the government and the BSP have been making good use of this policy space. The country has ample room for additional policy stimulus, if needed, given the relatively low level of public debt and well anchored inflation expectations,” Yang said.
Aside from the cumulative 75-basis-point reduction in the monetary policy rate since February 2020, Bangko Sentral ng Pilipinas (BSP) has also reduced the reserve requirement ratios of universal and commercial banks as well as non-bank financial institutions with quasi-banking functions by 200 basis points; suspended the term deposit facility auctions for certain tenors; reduced the term spread on the peso rediscounting loans relative to the overnight lending rate to zero; and, relaxed various regulations pertaining to compliance reporting, calculation of penalties on required reserves, and single borrower limits.
Yang also said the financial assistance extended to vulnerable households and workers as well as the health care sector is a positive move.
“Healthcare workers are on the frontline of fighting the pandemic, and the poor are the most vulnerable to the impact of crises like this pandemic. Given this, it is critical to respond promptly and forcefully to the needs of the poor and the vulnerable, as well as the healthcare sector. We welcome the government’s P200 billion cash aid program to help 18 million low-income households,” Yang said.
Late March, the IMF declared a global economic recession, as the spread of the new coronavirus has stunted economic activity across the globe.
IMF managing director Kristalina Georgieva raised concern over the long-lasting impact of the sudden halt, among them vast joblessness.
“It is now clear that we have entered a recession — as bad as or worse than in 2009,” Georgieva said.
Despite this, Georgieva said they expect a sizeable rebound in 2021, if countries succeed in containing the virus and preventing liquidity problems.
“The length and depth of this recession depend on two things – containing the virus and having an effective, coordinated response to the crisis,” she added.
