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The World Bank expects the Philippine economy to sink further in 2020 due to the still negative gross domestic product (GDP) in the third quarter and the impact of the recent strong typhoons that hit the country in the latter part of the year.
In its latest Philippine economic update, the multilateral lender said the economy will likely contract 8.1% this year due to “multiple shocks” that hit the country, such as the COVID-19 health crisis, economic activities across the country. frozen by quarantine measures, the devastating typhoons of November and the global recession.
The latest World Bank economic projection for the Philippines is a revision of its forecast of -6.9% last October.
The revised outlook is due to the “deep contraction in the third quarter and the extensive damage and losses suffered by the country from the typhoons and floods in November.”
The Philippine economy remained in negative territory during the third quarter, posting -11.5% as the country continues to recover from the economic fallout of the COVID-19 pandemic.
“The series of natural disasters that hit the country as we fight the pandemic highlights the importance of mainstreaming disaster risk reduction and climate change adaptation into policy and planning,” Ndiame Diop, World Bank Country Director for Brunei, Malaysia, Thailand and the Philippines. he said in a virtual briefing.
“While the Philippines is financially resilient, stronger coordination, execution and implementation will help further enhance social and physical resilience to frequent shocks,” added Diop.
Typhoons Rolly, Siony and Ulysses, which hit the country in November in just two weeks, have devastated a large swath of Luzon, further clouding this year’s growth prospects.
Before the onslaught of the climatic shocks, the economy had already registered a 10% contraction in the first three quarters, the worst since the 1985 debt crisis, due to a fall in private domestic demand, a deep contraction in weak investment and export activities.
Private consumption, which makes up two-thirds of the Philippine economy, has declined at a record pace due to high unemployment and falling incomes, according to the World Bank.
The World Bank’s economic forecast is in line with the Duterte administration’s economic managers’ revised outlook from -8.5 to -9.5% for this year due to the “prolonged imposition of community quarantines in various regions of the country.”
The economic team also took into account the recent natural calamities that hit the country in its revised economic projections.
“Fourth quarter (fourth quarter) GDP could be .62 percentage points lower and full year could be -.17 percentage points lower due to La Niña, African swine fever and recent strong typhoons,” said the secretary. Interim Socioeconomic Planning Karl Chua said earlier.
The World Bank economic update also said that the pandemic and natural disasters threaten to reverse the trend of a steady decline in poverty in recent years.
The lender noted that the results of its COVID-19 impact monitoring survey conducted in August 2020 show that approximately 40% of households reported a drop in income.
He added that business income reportedly also declined, particularly among households engaged in non-farm businesses.
Likewise, it was reported that remittances from abroad, a livelihood for many Filipino families, were reduced by two out of every five households that receive remittances, according to the survey.
As a result, poverty is estimated to rise from 20.5% in 2019 to 22.6% in 2020, measured against the World Bank’s lower-middle-income poverty line of $ 3.2 a day.
However, the World Bank expects the Philippines to recover in the next two years, assuming continuous improvements to reduce transmission of the virus.
Policymakers are gradually allowing more industries to resume operations, thus reviving jobs and incomes, and boosting private consumption.
This will help the economy recover to growth of 5.9% in 2021 and 6.0% in 2022, the World Bank said.
“In addressing the pandemic, the country must maintain focus on the structural reform agenda,” said Rong Qian, a senior economist at the World Bank.
“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,” said Qian.
The World Bank noted that its current forecasts hinge on China’s early recovery, coupled with the expected rebound in the world economy in 2021, which will allow export growth to recover and higher remittance inflows to stimulate domestic demand.
The government is expected to increase its spending on infrastructure starting in the fourth quarter of 2020, creating jobs in the construction sector, he said.
Pre-election activities in the run-up to the national elections in 2022 will give an additional boost to demand already in the second half of 2021, he added.
The World Bank’s Philippine Economic Update summarizes major economic and social events, major policy changes, and developments in external conditions that have affected the Philippines over the past six months.
It also presents findings from recent World Bank analyzes, placing them in the context of the country’s long-term development trends and assessing their implications for the country’s medium-term economic prospects. —KBK, GMA News
