By CHINO S. LEYCO
The Asian Development Bank (ADB) expects the Philippine economy will contract worse than government’s prediction this year as consumers and investors remain unsure of the future in the wake of the coronavirus pandemic.
Based on the Asian Development Outlook Supplement released yesterday, the ADB now expects the gross domestic product (GDP), the broadest measure of the country’s economy, would shrink by 3.8 percent this year, a reversal of an earlier growth estimate of 2.0 percent.
The Manila-based lender’s projected level of economic decline is wider compared with the Duterte administration’s target of around minus 2.0 percent to minus 3.4 percent for this year.
“The forecast for 2020 is revised down to 3.8 percent contraction because household consumption and investment have slowed more than expected,” the ABD said.
In January to March, the growth in household consumption, comprising three-fourths of GDP, was flat, while investment slumped by 18.3 percent mainly on lower outlays for machinery and equipment during the period.
Aside from unfavorable domestic consumer sentiment, the ADB also said that contraction in the global economy will continue to drag the nation’s external trade, tourism and remittances from overseas.
The Philippine economy already contracted by 0.2 percent in the first three-months of the year as border restrictions crimped tourism receipts while the Enhanced Community Quarantine measures depressed domestic demand.
However, the ADB maintained its GDP forecast for next year at 6.5 percent as the bank expects recovery in public infrastructure spending along with anticipated comeback in consumer and business confidence.
But the ADB’s 2021 GDP forecast is still slower than the economic mangers’ target of 8.0 percent to 9.0 percent.
Earlier, World Bank Senior Economist Rong Qian said the coronavirus pandemic was taking a heavier toll on the Philippine economy than its neighboring countries due to government’s stringent lockdowns.
The World Bank senior economist also noted that the Philippines was affected by the eruption of Taal Volcan in January.
As the country’s economy was seen by the Washington-based lender to shrink by 1.9 percent this year, Qian warned that Filipinos have yet to see the full-extent of the coronavirus pandemic.
Noting the local coronavirus infections had “not yet peaked,” the World Bank had also downgraded its 2020 GDP forecast for the Philippines by as much as eight percentage points, among the largest revisions in the Southeast Asian region.
Qian attributed the huge downward revision on the Philippines’ approach to contain the spread of the coronavirus disease that already affected at least 27,238 people and claimed more than 1,000 lives.
“We are among the largest downward revision. I think part of the reason is because the Philippines is the first one to impose the very strict community quarantine which basically shutdown the economy for almost two months,” Qian said.
“Other countries are not doing that precisely as you know that the Vietnam was not doing that and they are more focusing on the contact tracing and testing. So that’s explaining a large part of the why the GDP downward revision is larger,” she added.