World Bank sees worse contraction for PH economy due to viruses and typhoons

MANILA – The World Bank further downgraded its 2020 economic outlook for the Philippines following a worse-than-expected contraction in the third quarter, as well as typhoons that ravaged the country in October and November.

The multilateral lender said the Philippine economy is likely to contract 8.1 percent this year, which is worse than its already lowered forecast from 6.9 percent issued in October.

However, it forecasts the economy to recover by 5.9 percent in 2021 and 6 percent in 2022. Although it is still below the government’s expectations of growth of 6.5 to 7.5 percent in 2021 and 8 to 10 percent in 2022.

Among the drivers of growth, he cited spending related to the 2022 elections for the coming years, as well as the series of infrastructure projects promoted by the government, which according to the World Bank would help create jobs and ensure a stable economic base. .

But the World Bank also warned that this year’s recession will temporarily reverse the gains made in reducing poverty.

“The series of natural disasters that hit the country as we fight the pandemic highlights the importance of incorporating disaster risk reduction and adaptation to climate change into policy and planning,” said Ndiame Diop, Country Director of the World Bank for Brunei, Malaysia, Thailand and the Philippines.

“While the Philippines is financially resilient, stronger coordination, execution and implementation will help further enhance social and physical resilience to frequent crises.”

Typhoons Rolly (international name Goni), Siony (Atsani) and Ulysses (Vamco) that hit the country in November in just two weeks have caused billions of pesos in damage to infrastructure and agriculture.

Before these disasters, the economy had already registered a 10% contraction in nine months, the worst since the 1985 debt crisis, due to the fall in private domestic demand, the deep contraction in investment activities and the weak exports.

Private consumption, which accounts for two-thirds of the Philippine economy, also declined at a record pace due to high unemployment and falling incomes.

“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.”

He added that the government’s fiscal response under the Bayanihan to Heal as One Act (Bayanihan 1) and the Bayanihan to Recover as One Act (Bayanihan 2) can help boost the country’s growth potential.

“As we have seen, after Bayanihan 1, Bayanihan 2 has produced a second package and this has been more surgical than the first package that is needed to complement what was approved in Bayanihan 1, which focuses on poor and vulnerable response, Qian explained.

Likewise, he said, an early launch of a COVID-19 vaccine can help boost the economic outlook for the Philippines.

“In our baseline assumption, we are not assuming that the vaccine will be released very soon. So if the vaccine is released next year, it will really be an upside risk to our baseline projection,” Qian said.

He explained that the vaccine can help create more jobs as more people can re-enter the economy.

Qian added that this can also help build trust not only in the Philippines but also in other countries, which would improve the prospects for international trade.

In the meantime, Diop said, the World Bank stands ready to help the Philippines recover from the health crisis.

“Our agreement is to focus on three areas. One is investing in Filipinos, this is really one of the key strategies of the World Bank and it is to support health, education, social protection and social assistance and support communities.” he said.

The World Bank Group is preparing up to $ 160 billion over a 15-month period ending in June 2021 to help more than 100 countries protect the poor and vulnerable, support businesses, and bolster economic recovery from shocks. negative of the COVID-19 pandemic.