The Asian Development Bank (ADB) sees a deeper contraction for the Philippines this year amid the new coronavirus disease 2019 (COVID-19) pandemic.
In its Asian Development Outlook 2020 Update released yesterday, the ADB said the Philippine economy is forecast to drop by 7.3 percent this year, a steeper decline versus its April forecast of a 3.8 percent contraction.
The multilateral agency’s most recent projection is even below the Philippine government’s Development Budget Coordination Committee’s most recent forecast for the year, which is a drop of around 5.5 percent, or a contraction with a band of -4.5 percent to -6.6 percent.
The ADB said the revised outlook considers subdued private consumption and investment expected for the rest of the year and uncertainties about the global economic recovery.
Growth however is expected to return in 2021, to 6.5 percent, as the outbreak is contained, the economy is further opened, and more government stimulus measures are implemented.
“We believe the worst is now over and that the contraction in GDP (gross domestic product) bottomed out in May or June this year. The package of measures the government rolled out such as income support to families, relief for small businesses, and support to agriculture in the second quarter all helped the economy to bottom out,” Kelly Bird, ADB country director for the Philippines, said in a statement yesterday.
“We expect the recovery to be slow and fragile for the rest of this year, and growth to accelerate in 2021 on the back of additional fiscal support and an accommodative monetary policy stance,” he added.
The report, however, said the forecast for slow recovery in the second half of 2020 and stronger growth in 2021 is subject to downside risks.
“Recurring or worsening COVID-19 outbreaks pose the risk of containment becoming longer and more stringent, which would again impede economic activity,” the ADB said.
“Disappointing global recovery would weigh heavily on trade, investment and worker remittances,” it added.
The report also revised the Philippines’ inflation forecasts to 2.4 percent in 2020 and 2.6 percent in 2021, compared with the April projections of 2.2 percent and 2.4 percent, respectively, as global oil prices stabilize.
“The forecasts are within the Philippine central bank’s target range of two to four percent, with monetary policy likely to continue to help the economy’s rebound from the pandemic,” the ADB said.
The multilateral agency has so far provided about $2.3 billion in loans and grants to support the Philippine government’s urgent COVID-19 response, including social protection and livelihood support to help mitigate the impacts on livelihoods and employment and assistance to further scale up the government’s health response against the pandemic.
“ADB has thrown its full support to the government’s COVID-19 response, delivering a combination of loans and grants to help finance measures aimed at lessening the pandemic’s impact on lives and livelihoods,” Bird said.