ADB: PH economy to contract by 3.8%

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The Asian Development Bank (ADB) expects the Philippine economy to contract by 3.8 percent this year, saying investments and consumption were slower than expected amid the crisis brought by the coronavirus disease 2019 (COVID-19) pandemic.

The ADB’s supplement to the Asian Development Outlook report released yesterday indicated a revision of its projection last April where it said the Philippines can grow by 2 percent.

The latest growth outlook is also lower than the Development Budget Coordination Committee’s projection that the economy will contract by 2 to 3.4 percent this year.

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“The forecast for 2020 is revised down to 3.8 percent contraction because household consumption and investment have slowed more than expected,” the ADB said.

“The contraction in the global economy will continue to drag external trade, tourism and remittances,” it added.

But the Manila-based agency‘s forecast for 2021 is maintained at 6.5 percent as the economy is supported by public infrastructure spending and anticipated recovery in consumer and business confidence.

The bank’s report also said inflation forecasts for the Philippines are maintained at 2.2 percent this year and 2.4 percent next year, as lower oil prices offset possibly higher prices for food from feared domestic supply disruption.

Earlier, the World Bank projected that the Philippine economy will contract by 1.9 percent in 2020, amid the natural disasters experienced earlier this year and the disruptions brought by the COVID-19 pandemic.

The World Bank’s latest projection for the Philippines sharply fell from its previous forecast in January of 6.1 percent, or by 8 percentage points.

The growth forecast for 2020 assumes that the containment measures will gradually ease in the second half of the year, the Washington-based agency said, and economic activities return in some sectors of the economy.

The bank expects economic growth to return to above 6 percent in 2021 and 7 percent in 2022.

The economy in the first quarter contracted for the first time in more than 21 years.

The GDP declined by 0.2 percent in the first quarter of 2020, the first contraction for the Philippine economy in 85 quarters, or since the fourth quarter of 1998, then with a decline of 0.3 percent.

It was also the first time real GDP growth fell into negative territory since 1998, during the combined El Nino and Asian financial crisis.

Main contributors to the decline were manufacturing; transportation and storage; and accommodation and food service activities.

Among the major economic sectors, agriculture, forestry, and fishing; and industry contracted by 0.4 percent and three percent, respectively. On the other hand, services still posted a growth of 1.4 percent during the period.

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