IMF cuts Philippine economic growth forecast for 2021, 2022

The International Monetary Fund (IMF) has slashed its Philippine economic growth forecast for this year and the next, citing the recent surge in COVID-19 cases which prompted the imposition of stricter lockdowns.

In its latest World Economic Outlook published Tuesday, the Washington-based lender downgraded its growth outlook for the country to 3.2% this year from its 5.4% projection announced in June. 

The IMF’s latest forecast is also lower than the government’s full-year target of 4% to 5% this year.

“We have downgraded projection for this year because of the developments in the second quarter when the pandemic took a turn for the worse and case loads went up,” IMF World Economic Studies Division chief Malhar Nabar said in a televised press conference.

The country’s gross domestic product (GDP) grew 11.8% in the April to June 2021 period, its highest quarterly reading in 32 years owed largely to “low base effect” since the comparable period in 2020 was at -16.9%.

The second quarter of 2020 was a period when most of the economy was shut down due to the imposition of an enhanced community quarantine (ECQ)—the strictest form of lockdown—to arrest the spread of COVID-19.

This year, Metro Manila was placed under ECQ from March 29 to April 11, followed by the modified ECQ (MECQ) from April 12 to May 14.

This was followed by a general community quarantine (GCQ) for most of June and July.

The ECQ was reimposed from August 6 to 20 followed by an MECQ from August 21 to September 15, amid the threat of the highly contagious Delta variant of the coronavirus.

While the exit from the pandemic-induced recession was a welcome development, the Philippine economy is still far from reaching the growth levels in 2019 or before the COVID-19 crisis.

“We also expect shallower recovery in the second half of this year because of renewed concerns about caseloads,” Nabar said.

For 2022, the IMF estimated the country’s economy to grow by 6.3% as against 7% it projected in June due to the slower growth expected this year.

The IMF’s 2022’s forecast is also lower than the government’s target range of 7% to 9% for next year.

“We think with continued vaccine rollout, continued policy support, [and] continued recovery in the Philippines economy, we project growth of about 6% in 2022,” Nabar said.

Improvements in the trading partners’ growth could also support the country's economy in 2022, he said. — VBL, GMA News