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Since COVID-19 is not yet contained in the Philippines, the World Bank expects gross domestic product (GDP) to contract by 6.9 percent this year, the worst drop in 35 years, even as the chief economist of the The country expects a slower-than-record contraction in the third quarter. fall to the height of the closure in the second trimester.
The Washington-based multilateral lender’s updated GDP forecast for the Philippines, contained in its October 2020 East Asia and Pacific Economic Update report released Tuesday, was a steeper drop than the 1.9 percent drop. projected in June.
Forecasts from the World Bank, as well as from most other banks and financial institutions, went beyond the government’s projection of a contraction of 4.5 to 6.6 percent for the full year.
Acting Secretary for Socio-Economic Planning Karl Kendrick Chua told the Inquirer on Tuesday that the economic team was constantly reviewing its own forecast as new data came in.
But Chua, who heads the state planning agency, the National Economic and Development Authority (Neda), said he believed the worst was over for the Philippine economy.
Citing the latest monthly manufacturing, foreign trade and labor data, Chua said these “suggest an improvement” in second-quarter GDP, which fell by a record 16.5 percent, as 75 percent of the economy was halted by the strictest COVID. 19 quarantine in the region from mid-March to May.
However, manufacturing and trade data remained negative to date, so Neda’s undersecretary Rosemarie G. Edillon told a news conference Tuesday that third-quarter performance will likely remain negative year-on-year. .
The World Bank’s full-year GDP forecast, if met, would match the 6.9 percent economic contraction in 1985, at the height of a debt crisis during the final years of the Marcos dictatorship.
The World Bank’s senior economist for the Philippines, Rong Qian, told an online press conference on Tuesday that GDP would return to pre-pandemic levels by the end of 2021, a slower pace compared to neighboring countries such as Indonesia, where cases of COVID-19 also remain elevated.
Qian said it didn’t help that the Philippine economy was “much more connected to the world” than the country-driven Indonesia’s, especially in terms of tourism, services and commercial exports, as well as remittances.
In addition to the increased exposure to global demand, the Philippines also had a longer and tighter COVID-19 lockdown, Qian added.
Qian agreed that the third quarter would be better than the second quarter’s economic share, citing the improvement in revenue collection as the economy gradually opened up.
However, Qian said that the recovery would slow further if COVID-19 cases in the Philippines rise and the country returns to lockdown or if the global economy slides into a deeper recession.
Based on the World Bank poverty line for lower-middle-income countries of $ 3.2 per day per capita at 2011 purchasing power parity (PPP), the lender estimated that the poverty rate in the Philippines will rise to 22.4 percent this year from 20.5 percent last year, “despite the government’s efforts to mitigate the negative effects of the pandemic on poor and vulnerable households.”
Qian said this would translate to an additional two million Filipinos becoming poor in 2020.
“If wage and non-farm employment increases with GDP growth and inflation is stable, the poverty rate is likely to decline to its 2018 level by 2021 and maintain a downward trend through 2022,” the World Bank said .
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