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The World Bank cut its growth projection for the Philippine economy even further this year after taking into account continued contraction in the third quarter and losses suffered by recent typhoons.
In its Philippines Economic Update (PEU) report on Tuesday, the Washington-based financial institution said that gross domestic product (GDP) was forecast to contract 8.1 percent this year, worse than its previous outlook of a contraction of 6.9 percent.
The latest outlook reverses last year’s 6.0 percent GDP growth, but falls outside the government’s recently revised projection of a drop from -8.5 to -9.5 percent.
Worse than -7.3 percent from Asian Development Bank and -7 percent from Moody’s Investors Service, but better than -9.6 percent from Fitch Ratings, -9.5 percent from S&P Global Ratings and -8.3 percent from the International Monetary Fund.
The economy remained in recession after it contracted 11.5 percent in the third quarter, 16.9 percent in the second and 0.7 percent in the first due to the continued impact of the disease pandemic. coronavirus 2019 (Covid-19). This brought the GDP contraction to 10 percent in the first nine months.
Typhoons “Rolly” (international name: Goni) “Siony” (Atsani) and “Ulysses” (Vamco), which struck the country in early November, devastated Luzon and left tens of billions of pesos in damage to agriculture and infrastructure, which the World Bank said contributed to the low outlook.
The pandemic also threatens to reverse the steady decline in poverty in recent years, resulting in an additional 2.7 million poor people this year, which the World Bank measures using the $ 3.2-a-day poverty line. , not the poverty line defined by the country.
“Our baseline assumption assumes that the poverty number will drop to [the] 2018 level and slightly back to [the] 2019 [level] by 2022, ”World Bank senior economist Rong Qian said in a briefing.
Recovery in the next two years
The financial institution expects the economy to recover in the next two years, assuming that efforts to reduce the rate of coronavirus infection continue to improve.
Noting that lawmakers were gradually allowing more industries to resume operations, thereby reviving jobs and increasing income, and increasing private consumption, the World Bank said this would help the economy recover and grow by 5.9 percent. percent in 2021 and 6 percent in 2022.
Qian said the latest World Bank forecast also included the assumption that a Covid-19 vaccine would not be released soon.
The report also highlighted that the country’s recovery would be influenced by the government’s effectiveness in flattening the coronavirus curve.
The World Bank has warned that new cases of coronavirus could lead to the reimposition of stricter containment measures, which could slow economic activities, reduce consumption and delay the implementation of public infrastructure projects.
New waves of coronavirus infections in advanced economies and regional trading partners of the Philippines are also expected to have a negative impact on the country’s exports, foreign direct investment, and remittances.
In tackling the pandemic, the country must keep the focus on the structural reform agenda, according to Qian.
“Accelerating reforms that improve the business environment, foster competition, and strengthen resilience to natural disasters will support economic recovery and drive long-term productivity growth,” he said.
Ndiame Diop, World Bank Country Director for Brunei Darussalam, Malaysia, Thailand and the Philippines, said the natural disasters that struck the country recently highlighted the importance of mainstreaming disaster risk reduction and climate change adaptation into policies and planning.
“While the Philippines is financially resilient, stronger coordination, execution and implementation will help further enhance social and physical resilience to frequent shocks,” he added.
To strengthen the country’s resilience to natural disasters, the World Bank said the government should strengthen the integration of disaster risks into the fiscal strategy; incorporate risk reduction in development planning and infrastructure investments, as well as ensure adequate budget allocation; address capacity constraints in the implementation and supervision of disaster risk management programs; increase the transparency and efficiency of post-disaster spending by local government units; and promoting “green recovery” by investing in resilience and integrating resilience.
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