The World Bank said the Philippines is facing weaker long-term growth due to lower capital investment as well as loss of human and intangible capital.
Without mitigation measures, the Washington-based multilateral institution warned that the country’s long-term growth potential will be only at around 5.7 percent on average, between 2020 and 2029, below the pre-pandemic estimate of more than six percent.
The World Bank attributed the weak growth potential to the adverse impacts of the prolonged pandemic.
According to the bank, nearly 10 percent of companies in the country have now closed and do not expect to reopen in short-term, while a further 15 percent have closed but expect to reopen at some capacity.
“Firm closures are directly contributing to permanent jobs and income losses and the erosion of valuable intangible assets, such as management and technical know-how, employee competencies, and value network and relationships,” World Bank said.
While some companies survived the pandemic-induced crisis, World Bank said they face impaired balance sheets and are deferring productive investments.
“Unemployment, disruption in education, and a higher incidence of malnutrition among the poor are eroding human capital and hurting peoples’ future earning potential,” the lender said.
The challenge is to limit the economic scarring by capitalizing on growth opportunities, the World Bank said.
Among the growth opportunities cited by the World Bank are the acceleration of digitalization, and implementing a catch-up plan to mitigate the adverse socio-economic impacts of the pandemic.
Last November, Socioeconomic Planning Secretary Karl Kendrick T. Chua said that an effective management of coronavirus risks will allow the country’s economy to recover to the pre-pandemic level by early next year.
In the third-quarter, the economy grew by 7.1 percent.
“Our economic growth remains promising and we need to build on these gains to accelerate recovery, and prevent long-term scarring and productivity losses,” Chua said.
Earlier, the World Bank raised the economic outlook for the Philippines to 5.8 percent for this year from an earlier estimate of 4.3 percent due to better-than-expect growth performance in the third-quarter.
“This upward revision follows the official growth rate of 7.1 percent for Q3 2021, which exceeded the Bank’s projection of 4.8 percent,” World Bank said.
“Moving forward, the economic impact of the pandemic is expected to be less severe especially as the government implements its policy of phased economic reopening,” it noted.
With this prospect, the World Bank noted that the economy is projected to grow faster in 2022 until 2023 at an average of 5.8 percent.