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Metro Manila (CNN Philippines, October 13) – The Philippine economy is likely to contract by 8.3 percent in 2020 and will be “marked significantly” by the COVID-19 pandemic in the coming years, the International Monetary Fund said.
In its October World Economic Outlook (WEO) report released on Tuesday, the global lender said the Philippines will fare much worse than the previously projected contraction.
“The downward revision of the 2020 growth forecast for the Philippines from -3.6 percent in the June WEO to -8.3 percent in the October WEO primarily reflects a larger than expected slowdown in the second quarter and a more gradual resolution of the pandemic as seen months past, with prolonged social distancing, “IMF country representative Yongzheng Yang said by email.
The economy contracted by 16.5 percent in the second quarter, the sharpest since records available in the 1980s to officially put the Philippines into recession.
“Despite a somewhat softer global contraction expected in the October WEO report, weak public confidence and low remittances in the Philippines as a result of the pandemic are expected to continue to affect private investment and consumption,” Yang added.
The revised projection for the Philippines is the opposite of the IMF estimate for world production, which sets a relatively smaller contraction of 4.4 percent compared to 4.9 percent projected in June. By next year, the world economy could achieve growth of 5.2 percent, according to the IMF.
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The pandemic is expected to send about 90 million people into extreme deprivation after the “Great Shutdown,” the IMF said. He previously called the pandemic “a crisis like no other.”
There are more than 37 million cases of COVID-19 in the world, which has caused more than one million deaths. In the Philippines, the infection continues to rise by the thousands a day, standing at 344,713 as of Tuesday.
The IMF said the outlook has “significantly worsened” among emerging markets such as the Philippines, noting that the overall recovery will be long, uneven and uncertain.
The Philippines’ shrinkage is among the worst in Asia, just a third of Macau’s 52.3 percent decline and India’s 10.3 percent decline.
Only China and Vietnam will grow 1.9 percent and 1.6 percent, respectively, while Taiwan will see production remain stable.
“Most economies will experience lasting damage to supply potential, reflecting the scars of this year’s deep recession and the need for structural change,” the report read.
The Philippines is expected to rebound with growth of 7.4 percent next year, but it is mainly due to a low base and the roll-out of “pent up demand” after months of strict quarantine and easing of policy.
“However, significant healing effects are expected (eg, hysteresis, bankruptcies) and it will be a couple of years before real GDP returns to the pre-pandemic (2019) level,” Yang added, citing risks greater than the usual for growth.
On the positive side, Yang said the slowing down of the pandemic can be used to accelerate key reforms such as national ownership and easing investment restrictions.
The Asian Development Bank sees a 7.3 percent contraction, while the World Bank pegs the recession at 6.9 percent this year. All of these estimates run deeper than the economic team’s 5.5 percent projected decline, but are within the 7-9 percent estimate given by central bank governor Benjamin Diokno.
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