The World Bank expects the Philippine economy to slip deeper than initially estimated, but the level of contraction will be less severe than the Duterte administration’s projection.
In its latest Philippine Economic Update, the Washington-based financial institution said the COVID-19 pandemic delivered a triple shock to the country that could drag down its local economy by as much as 8.1 percent this year.
The World Bank’s latest economic projection is a revision from its 6.9 percent contraction estimate in October, but better than the government’s new forecast range of -8.5 percent to -9.5 percent.
World Bank lowered its growth forecast on expectations of heavier impacts of the ongoing health crisis, strict containment measures, and unprecedented scale of global recession on the Philippines.
The economy slipped into recession in the first half of 2020 for the first time since 1991.
From January to September, the gross domestic product (GDP) contracted by 10 percent year-on-year.
“The severity of the recession can be explained, first and foremost, by the collapse in private consumption, as containment measures led to a fall in employment and incomes,” the World Bank report said.
“Moreover, the country was hit by a series of strong typhoons which may cause delay on the pace of the recovery as economic activities were affected in some areas,” it added.
To recall, typhoons “Rolly,” “Siony,” and “Ulysses struck the country last month in just a span of two weeks that brought devastation to a large swath of Luzon, which World Bank said "further darkening this year’s growth outlook.”
While most of the country entered a more relaxed community quarantine in mid-August with a gradual opening of businesses and government operations, World Bank also noted that the economic recovery remains “fragile, uneven, and incomplete.”
“The surge in new cases in highly urbanized areas such as Davao City, Makati City, and Baguio City suggest that this recovery remains fragile and contingent on the sustained progress in managing the COVID-19 pandemic,” the report said.
Likewise, investment activity in the country has been repressed by the recession, coupled with elevated levels of uncertainty, and deterioration in business confidence, World Bank said.
The key economic indicators are unfavorable.
Fixed capital formation growth contracted by 22.3 percent, while business confidence plunged to -5.3 percent in the third quarter, the first time since the second quarter of 2009.
Meanwhile, World Bank said the Philippine economy could recover in the next two years as long as it can sustain the improvements in bringing down coronavirus transmission.
“While addressing the pandemic, the country needs to sustain focus on the structural reform agenda,” Rong Qian, World Bank senior economist said.
“Speeding up reforms that improve the business environment, foster competition, and strengthen resilience against natural disasters will support the economic recovery and boost productivity growth in the long term,” she added.
In 2021, World Bank forecasted the local economy will bounce to a 5.9 percent and 6.0 percent the following year.