The World Bank is expecting the Philippine economy to dive deeper in 2020 on account of the still negative gross domestic product (GDP) in the third quarter and the impact of recent strong typhoons that ravaged the country in the latter part of the year.
In its latest Philippine Economic Update, the multilateral lender said the economy will likely shrink by 8.1% this year due to “multiple shocks” that hit the country such as the COVID-19 health crisis, economic activities across the country frozen by quarantine measures, devastating typhoons in November, and the global recession.
The World Bank’s latest economic projection for the Philippines is a revision from its -6.9% forecast last October.
The revised outlook is on account of the “deep contraction in the third quarter and the extensive damage and losses suffered by the country from the typhoons and floods in November.”
Malacañang echoed the World’s Bank assessment but it also expressed hope for an economic recovery next year.
“Siyempre po nalulungkot tayo diyan dahil ibig sabihin mas maraming maghihirap sa pagbagal ng ating pag-unlad. Pero 'yan naman po ay naging resulta ng pandemya at ng mga sigalot na sunod-sunod na dumaan sa ating bansa,” presidential spokesperson Harry Roque said at a news conference.
“Kaya po natin ‘to. Babangon tayo. We will do better in 2021,” he added.
The Philippine economy remained in negative territory during the third quarter, clocking in at -11.5% as the country continues to reel from the COVID-19 pandemic’s economic fallout.
“The series of natural disasters that hit the country while we are battling the pandemic highlights the importance of mainstreaming disaster risk reduction and climate change adaptation into policy and planning ,” Ndiame Diop, World Bank Country Director for Brunei, Malaysia, Thailand and the Philippines, said in a virtual briefing.
“While the Philippines is financially resilient, stronger coordination, execution and implementation will help further improve social and physical resilience to frequent shocks,” Diop added.
Typhoons Rolly, Siony, and Ulysses -- which hit the country in November in just a span of two weeks -- have brought devastation to a large swath of Luzon, which further darkened this year’s growth outlook.
Prior to the onslaught of the weather disturbances, the economy had already posted a 10% contraction in the first three quarters -- its worst since the 1985 debt crisis -- due to a plunge in private domestic demand, deep contraction in investment activities, and weak exports.
Private consumption, which accounts for two-thirds of the Philippine economy, has declined at a record pace because of high unemployment and falling incomes, according to the World Bank.
The World Bank’s economic forecast is in line with the Duterte administration’s economic managers’ revised outlook of -8.5 to -9.5% for this year due to “prolonged imposition of community quarantines in various regions in the country.”
The economic team also took into consideration the recent natural calamities that hit the country in their revised economic projections.
“The Q4 (fourth quarter) GDP might be .62 percentage points lower and the full-year might be -.17 percentage points lower because of La Niña, African Swine Fever, and the recent strong typhoons,” Acting Socioeconomic Planning Secretary Karl Chua earlier said.
The World Bank economic update also said that the pandemic and natural disasters threaten to reverse the trend of a steady decline in poverty in recent years.
The lender noted that results of its COVID-19 impact monitoring survey conducted in August 2020 show about 40% of households reported a fall in income.
It added that entrepreneurial income also reportedly declined, particularly among households engaged in non-farm business.
Likewise, remittances from abroad, a lifeline for many Filipino families, were reported to have fallen for two in five households that receive remittances, according to the survey.
As a result, poverty is estimated to increase from 20.5% in 2019 to 22.6% in 2020 as measured against the World Bank lower middle-income poverty line of $3.2 a day.
Nevertheless, the World Bank expects the Philippines to recover in the next two years, assuming continuing improvements in bringing down virus transmission.
Policy makers are gradually allowing more industries to resume operations, thus reviving jobs and incomes, and boosting private consumption.
This will help the economy bounce to a 5.9% growth in 2021 and 6.0% in 2022, the World Bank said.
“While addressing the pandemic, the country needs to sustain focus on the structural reform agenda,” said Rong Qian, World Bank Senior Economist.
“Speeding up reforms that improve the business environment, foster competition, and strengthen resilience against natural disasters will support the economic recovery and boost productivity growth in the long term,” Qian said.
Sought for comment, National Economic and Development Authority’s (NEDA) Chua said the key to recovery “will be to open more of the economy to see income sources return.”
The Philippines has been under lockdown for nearly nine months, after the first restrictions were implemented in March to curb the spread of COVID-19.
A general community quarantine (GCQ) has remained in place in Metro Manila and other key areas, and just this week was extended to last until the end of the year.
The World Bank noted that its current forecasts is hinged on China’s early recovery, alongside the expected rebound in the global economy in 2021, which will allow for export growth to recover, and larger remittance inflows to stimulate domestic demand.
The government is expected to ramp up its infrastructure spending starting in the fourth quarter of 2020, creating jobs in the construction sector, it said.
Pre-election activities in the run-up to the national election in 2022 will give an additional boost to demand as early as in the second half of 2021, it added.
The World Bank’s Philippine economic Update summarizes key economic and social developments, important policy changes, and the evolution of external conditions affecting the Philippines over the past six months.
It also presents findings from recent World Bank analyses, situating them in the context of the country’s long-term development trends and assessing their implications for the country’s medium-term economic outlook. —with Virgil Lopez/KBK/AOL, GMA News