PH economy to now shrink nearly 4%

The Asian Development Bank (ADB) said on Thursday the Philippine economy was now forecast to contract by 3.8 percent this year due to consumption and investment weakened by the coronavirus disease 2019 (Covid-19) pandemic.

In its “ADB Outlook 2020 Supplement” report, the Manila-based multilateral lender said it further lowered its economic projection from the previous 2.0-percent growth for 2020 because “household consumption and investment have slowed more than expected.”

“The contraction in the global economy will continue to drag external trade, tourism and remittances” in the country, it warned.

The revised figure is worse than the 1.9-percent contraction forecast by the World Bank and the 0.6-percent growth projected by the International Monetary Fund. It is also a reversal of the 6.0-percent growth posted last year.

Despite the grim outlook, the ADB said it was keeping its growth forecast for next year “at 6.5 percent, supported by public infrastructure spending and anticipated recovery in consumer and business confidence.”

It was also maintaining its inflation outlook for the country at 2.4 percent for this year and the next as “lower oil prices offset possibly higher prices for food from feared domestic supply disruption.”

On developing Asia as a whole, the regional economy is forecast to grow by 0.1 percent this year, lower than the 2.2 percent projected in April. If correct, it would be the slowest recorded for the region since 1961. Growth in 2021 is still expected to hit 6.2 percent.

“Economies in Asia and the Pacific will continue to feel the blow of the Covid-19 pandemic this year, even as lockdowns are slowly eased and select economic activities restart in a ‘new normal’ scenario,” ADB Chief Economist Yasuyuki Sawada said.

“While we see a higher growth outlook for the region in 2021, this is mainly due to weak numbers this year, and this will not be a V-shaped recovery.Governments should undertake policy measures to reduce the negative impact of Covid-19 and ensure that no further waves of outbreaks occur,” he added.

According to the ADB, the pandemic may see multiple waves of outbreaks in the coming months, and sovereign debt and financial crises cannot be ruled out further. It said there was also the risk of renewed escalation in trade tensions between the United States and China.