The Asian Development Bank (ADB) has substantially slashed its economic growth forecast for the Philippines due to “considerable uncertainty” over the coronavirus pandemic.

In the latest Asian Development Outlook 2021 released on Wednesday, April 28, the Manila-based multilateral institution revised its gross domestic product (GDP) projection in 2021 to 4.5 percent.

ADB’s new growth forecast is two percentage points lower compared with original 6.5 percent in December. The latest estimate is also well below the government’s target of 6.5 percent to 7.5 percent.

“The recovery in the Philippines is expected to be fragile,” ADB said, citing that the rising COVID-19 infections and global supply shortages of vaccines as main factors.

Kelly Bird, ADB country director for the Philippines, however, clarified that the 4.5 percent is a “floor” forecast, saying the country, depending on how the pandemic unfolds this year, may still rebound by 6.5 percent.

“We've seen this as a floor. You’ve seen that there's a wide range of projections from 4.0 percent up to 6.5 percent, some have even gone to seven or 7.5 percent,” Bird said. “That just reflects a heightened uncertain environment that we're working in.”

But there are upsides to the conservative 4.5 percent forecast, Bird said. “If the vaccination programs go faster than we expected, or if consumers and businesses, their confidence recovers faster than we expect.”

ADB said uncertainties over the course of COVID-19 have weighted on household and business sentiment.

While unemployment rate remains high in January at 8.7 percent, ADB said the “moderate growth” in overseas worker remittances will support household consumption.

“Public investment will drive domestic investment,” ADB said, while “election-related spending ahead of the national elections in May 2022 will provide a modest lift to aggregate demand.”

But prospects for private investment remain subdued, ADB said, citing that companies are deferring capital expenditure owing to low capacity utilization amid community quarantine and social distancing measures.

ADB, meanwhile, is forecasting that inflation would inch up to 4.1 percent in 2021 from 2.6 percent last year due to rising global commodity prices and other supply-side factors, including African swine fever.

The Bangko Sentral ng Pilipinas monetary policy is likewise expected to stay accommodative, although further easing may be put on hold.