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THE PHILIPPINES is considered Post the worst economic performance in Southeast Asia this year, according to the Asian Development Bank (ADB), which cut its growth forecast again as household consumption and investment slow amid the coronavirus pandemic .
In its Asian Development Outlook (ADO) Supplement report released Thursday, the ADB now expects the Philippines’ gross domestic product to (GDP) will contract 8.5% from the -7.3% forecast in September. The revised forecast was on the lower end of the 8.5-9.5% drop projected by the Philippine government’s economic team.
“The GDP forecast for 2020 is lowered to a contraction of 8.5% because consumption and household investment have fallen more than expected,” said the multilateral lender.
The Philippines is likely to experience the steepest annual drop in GDP in Southeast Asia, behind Thailand (-7.8%), Singapore (-6.2%), Malaysia (-6%) and Indonesia (-2.2 %). Vietnam is only expected to grow this year with a GDP of 2.3%, revised up from the original forecast of 1.8%.
Apart from the Philippines, ADB also downgraded the outlook for Indonesia (-2.2% from -1% previously) and Malaysia (-6% from -5%), as a containment of the pandemic andffOrts continued to hamper economic recovery.
“The Philippine economy contracted 10.0% in January-September 2020, reflecting moderate activity and confidence from consumers and businesses during the pandemic,” the ADB noted.
Localized lockdowns or formally known as community quarantines are still being enforced in the Philippines, which has the second highest number of coronavirus infections in Southeast Asia after Indonesia. As of Thursday, the number of coronavirus infections in the country reached 445,540, while the death toll stood at 8,701.
The developing countries of Asia, a group of 45 Asia-Pacific nations, will likely contract 0.4% this year, less than the 0.7% forecast for September, the ADB said. Growth will pick up to 6.8% in 2021, but the ADB noted that “prospects diverge within the region.”
“A prolonged pandemic remains the primary risk, but recent developments on the vaccine front are moderating it. The safe, effective and timely delivery of vaccines in developing economies will be essential to support the reopening of economies and the recovery of growth in the region, “ADB chief economist Yasuyuki Sawada said in a statement.
The worsening tension between the United States and China over trade and technology was also noted as a risk to the region’s growth prospects.
For Southeast Asia, the ADB also lowered its GDP forecast this year to -4.4% from the previous forecast of -3.8%. It also cut Southeast Asia’s growth prospects for 2021 to 5.2% from 5.5% previously.
The ADB maintained its 6.5% growth forecast for the Philippines in 2021, “assuming public investment picks up and the world economy recovers.”
This is the second fastest estimated growth among Southeast Asian countries next year, behind Malaysia’s 7%.
Meanwhile, the ADB raised its 2020 inflation forecast for the Philippines to 2.5% from 2.4% in September, and kept the 2.6% outlook for 2021.
If done, the estimate for this year will coincide with the average inflation observed last year.
Headline inflation accelerated to 3.3% in November from 2.5% in October and 1.3% in the same month last year. This brought the 11-month average to 2.5%, still within the central bank’s 2-4% target.
The ADB raised its inflation forecast for Southeast Asia this year to 1.2% from 1% previously, but softened the forecast for next year to 2.2% from 2.3%. Headline inflation averaged 2.1% for Southeast Asian countries in 2019. – Beatrice M. Laforga
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