PH economy seen to contract by 7.3 percent in 2020 — ADB

by Cathrine Gonzales, Philippine Daily Inquirer, 15 Sep 2020

MANILA, Philippines — The Philippine economy is seen to contract by 7.3 percent in 2020, but is expected to rebound next year as the economy is further reopened and the coronavirus disease 2019 is contained, according to a report from the Asian Development Bank (ADB) released Tuesday.

The Asian Development Outlook 2020 Update projects a deeper decline in the county’s economic growth compared to its June forecast of 3.8 percent contraction.

ADB said it has projected such contraction, with “subdued private consumption and investment expected for the rest of the year and uncertainties about the global economic recovery.”

The multilateral lender also noted “downside risks” for next year, such as a slower than expected global recovery that could weigh heavily on trade, investment, and overseas Filipino worker remittances.

“We believe the worst is now over and that the contraction in GDP bottomed out in May or June this year. The package of measures the government rolled out such as income support to families, relief for small businesses, and support to agriculture in the second quarter all helped the economy to bottom out,” said ADB Country Director for the Philippines Kelly Bird.

“We expect the recovery to be slow and fragile for the rest of this year, and growth to accelerate in 2021 on the back of additional financial support and an accommodative monetary policy stance,” he added.

ADB has so far provided about $2.3 billion (around P111 billion) in loans and grants to support the Philippine government’s COVID-19 response, including livelihood support to help mitigate the impacts on livelihoods, and assistance to scale up the health response against the pandemic.

Following a contraction of 9 percent in the first half of 2020, a slow economic recovery was expected to start in the second half of the year, as the government’s fiscal response gains traction and household consumption slowly picks up on a job rebound, said ADB.

The lender noted that the unemployment rate in the country in July eased at 10 percent equivalent to 4.6 million jobless adult Filipinos, compared to the record-high 17.7 percent or 7.3 million unemployed individuals in April, following the relaxation of community quarantines in June.

The services sector was the main job creator with 3.4 million jobs added between April and July, followed by the agricultural and industrial sectors, with 2.1 million and 2 million, respectively.

ADB said the report revised the Philippines’ inflation forecasts to 2.4 percent in 2020 and 2.6 percent in 2021, compared with the April projections of 2.2 percent and 2.4 percent, respectively, as global oil prices stabilize.

The forecasts are within the Bangko Sentral ng Pilipinas’ target range of 2.0 to 4.0 percent, with monetary policy likely to continue to help the economy’s rebound from the pandemic.

JE