The Asian Development Bank (ADB) expects a deeper contraction in the Philippine economy this year as consumption and investments are seen to remain subdued for the remaining months of the year amid global uncertainly.

Based on the updated Asian Development Outlook 2020, the Manila-based multilateral institution has projected that the Philippines’ gross domestic product (GDP) will decline by 7.3 percent this year, worse than the bank’s June estimate of only 3.8 percent.

The latest GDP projection of the ADB is also wider than the Duterte administration’s 5.5 percent expected contraction for 2020.

ADB explained that the grimmer economic outlook is based on expectations of subdued private consumption and investment for the rest of the year coupled with uncertainties on the global economic recovery.

The local economy has contracted by 9.0 percent the first-semester of the year following the implementation of the longest and most stringent lockdown in the world.

Kelly Bird, ADB Philippines country director, meanwhile, said that the worst is over for the Philippines, noting that the economic contraction has 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,” the ADB official said.

For this reason, Bird expects a slow economic recovery in the second half of 2020 as the government’s fiscal response gains traction and household consumption slowly picks up on a jobs rebound.

Following the relaxation of community quarantines in June, the employment situation in July improved markedly from April.

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.

Bird also said the GDP will rebound in 2021 as the COVID-19 outbreak is contained, the economy is further reopened, and more government stimulus measures are implemented.

“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 fiscal support and an accommodative monetary policy stance,” Bird said.

He, however, flagged the downside risks next year, including a slower than expected global recovery that could weigh heavily on trade, investment, and overseas Filipino worker remittances.

ADB also revised the Philippines’ inflation forecasts to 2.4 percent this year and 2.6 percent in 2021, compared with the June projections of 2.2 percent and 2.4 percent, respectively, as global oil prices stabilize.

The inflation forecasts are within the Bangko Sentral ng Pilipinas’ target range of 2.0 percent to 4.0 percent.

“ADB has thrown its full support to the government’s COVID-19 response, delivering a combination of loans and grants to help finance measures aimed at lessening the pandemic’s impact on lives and livelihoods,” Bird said.

ADB has so far provided about $2.3 billion in loans and grants to support the government’s urgent COVID-19 response, including social protection and livelihood support to help mitigate the impacts on livelihoods and employment.

The banks also extended assistance to further scale up the government’s health response against the pandemic.