THE Duterte administration’s economic team projects that the economy will shrink by 2 to 3.4 percent this year, which will be the fastest decline in 35 years, as the country deals with the overall impact of the coronavirus disease 2019 (COVID-19) pandemic.
The Development Budget Coordination Committee (DBCC) said in a statement yesterday it has adjusted the country’s macroeconomic indicators and fiscal program for fiscal years 2020 to 2022.
Previously, government officials projected a contraction of 0.8 percent to a flat growth for the year. Before the pandemic happened, the DBCC’s growth target for 2020 is 6.5 to 7.5 percent.
The DBCC said the adjustments reflect “the Duterte administration’s priorities of saving lives and protecting communities, while providing support to vulnerable groups and stimulating the economy to create jobs and support growth.”
The National Economic and Development Authority estimates suggest that the potential impact of the pandemic on the economy could reach P2 trillion or about 9.4 percent of gross domestic product (GDP) this year.
If the economy contracts this year, it will be the first in more than two decades. According to data from the Philippine Statistics Authority (PSA), the last time the Philippine economy posted a negative performance was in 1998, with a 0.5 percent decline, as it was the year after the Asian Financial Crisis. There was also an El Niño at the start of the year.
However, if the actual contraction falls within the range of the DBCC’s projection, it will be the sharpest decline since 1985’s 6.9 percent drop, according to PSA data. The economy also fell by 7 percent in 1984, as these years marked the end of Ferdinand Marcos’ regime, who was then ousted in 1986.
The DBCC however expects the country to recover by next year, bouncing back with a GDP growth of 7.1 to 8.1 percent.
“Timely implementation of a well-targeted recovery program, alongside efforts of the private sector, will mitigate the impact of the COVID-19 pandemic,” the DBCC said.
“Such a program will help the country regain confidence, attain higher economic growth, and restore employment rates to pre-crisis levels,” it added.
Meanwhile, the Bangko Sentral ng Pilipinas (BSP) recommended the adoption of a lower price assumption for Dubai crude this year of between $23 to $38 per barrel following substantive weakness in global oil consumption amid the COVID-19 crisis.
For the next two years, the assumption is that the per barrel price will increase to between $35 to $50 per barrel.
The BSP also recommended a downward adjustment in the 2020 growth assumptions for goods exports and imports to negative four percent and -5.5 percent, respectively.
The DBCC said this is in anticipation of the global economy’s sharp contraction as a result of the COVID-19 pandemic.
For 2021 to 2022, growth in goods exports is expected to recover to 5 percent while growth in goods imports is projected to bounce back to 8 percent.
Assumptions for the foreign exchange rate for 2020 to 2022 of P50 to P54 against the US dollar and the current inflation target range of 2 to 4 percent are maintained.
However, the average inflation rate for 2020 is now projected to range from 1.75 to 3.75 percent due to subdued demand.
