PH economic dips further
Philippine economy seen to decline this year; recovery seen in 2021
MANILA – The latest report released by Asian Development Bank said the Philippine economy would dip by 7.4% this year with the COVID-19 pandemic before it returns to 6.5% next year.
In its Asian Development Outlook (ADO) 2020 Update, it projected a deeper decline in the country’s economy than ADB’s June forecast of 3.8% contraction, with subdued private consumption and investment expected for the remaining months and uncertainties about the global economic recovery.
It is expected to rebound next year as the outbreak is expected to be contained, the economy is further opened. However, the risks next year include a slower than expected global recovery that could weigh heavily on trade, investment, and overseas Filipino worker remittances.
“We believe the worst is now over and that the contraction in GDP bottomed out in May or June this year, The package of measures the government followed out such as income support to families, relief for small business, and support to agriculture in the second quarter all helped the economy to bottom out. We expect the recovery to be slow and fragile for the rest of the year, and growth to accelerate in 2021 on the back of additional fiscal support and an accommodative monetary policy stance,” said ADB Country Director for the Philippines Kelly Bird.
He added the ADB has supported the Philippine government’s COVID-19 response with a combination of loans and grants to help finance measures aimed at lessening the pandemic’s impact on lives and livelihoods.
The ADB has provided about US$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 and assistance to further scale up the government’s health response against the pandemic.
With a contraction of 9.0% during the first six months of the year, a slow economic recovery is expected to start in the second half of 2020 with the government’s discal response gains traction and household consumption slowly picks up on jobs rebound. With the easing 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 within the months of April and July. The agricultural generated 2.1 million jobs while the industrial sector had 2 million.
According to the ADB, the unemployment rate fell from 17.7% in April to 10.0% in July.
Additional fiscal support package up for implementation this month is expected to include cash subsidies to poor households, support for displaced workers and critically affected sectors including agriculture, tourism and transportation and relief to the health care system. These measures are expected to generate multiplier effects and keep the economy on track to recovery.
The same report revised the Philippines’ inflation forecasts to 2.4% in 2020 and 2.6% in 2021, compared with the April projection of 2.2% and 2.4%, respectively, with the stabilization of global oil prices. The forecasts fall within the Philippines’ central bank’s target range of 2.0% - 4.0%, with monetary policy likely to continue to help the economy’s rebound from the pandemic. (Melo M. Acuna)
ADB Country Director for the Philippines Kelly Bird. (ADB Photo)