The International Monetary Fund downgraded its 2020 growth forecast for the Philippines to 0.6 percent from a previous estimate of 6.3 percent after the debilitating impact of the coronavirus disease 2019 on the economy.
IMF resident representative to the Philippines Yongzheng Yang, however, said economic growth would likely rebound strongly to 7.6 percent next year.
“Real GDP growth in 2020 is projected to slow down to 0.6 percent before it rebounds to 7.6 percent in 2021. The downward revision of the 2020 growth forecast is mostly attributable to supply disruptions related to COVID-19 and weaker demand in the Philippines’ major trading partners,” Yang said in an e-mail when asked on the outlook for the Philippines following the release of the World Economic Outlook in April 2020.
“Tighter global financial conditions, weaker public confidence and lower remittances are also expected to weigh on private consumption and investment,” Yang said.
Yang, however, said the negative impacts of Covid-19 19 were “expected to be partially offset by policy support.”
He said the outbreak was assumed to peak in the second quarter, leading to a gradual recovery in the second half of the year. He said stemming the spread of the disease was of utmost importance.
“Policies at the moment should focus on both protecting public health and putting people back to work, but getting the virus under control is, if anything, a prerequisite to saving livelihoods,” Yang said.
“We welcome the authorities’ fiscal and monetary policy responses to the impact of COVID-19. Owing to prudent macroeconomic management, the Philippines has built considerable policy buffers in recent years,” Yang said.
Yang said in a briefing in February that the Covi9d-19 outbreak would heavily impact the tourism industry, which is one of the pillars of the domestic economy. He said China was one of the largest sources of tourists in the country.
Yang said one of the measures that would counter the impact of the disease to the economy was the move of the Bangko Sentral ng Pilipinas to cut the benchmark policy interest rates.
The BSP cut the benchmark interest rates by 50 basis points to 3.25 percent last month to provide monetary stimulus to counter the impending economic slowdown aid the onslaught of the pandemic.
A few days after that, the BSP cut the reserve requirement ratios of universal and commercial banks by 200 basis points or 2 percent to 12 percent, a move seen to boost domestic liquidity. The 200-bps cut could translate to around P180 billion to P200 billion in additional liquidity into the financial system.
The April WEO Report also projected global growth in 2020 to fall to -3 percent, a downgrade of 6.3 percentage points from January 2020, which is a major revision over a very short period.
“The world has changed dramatically in the three months since our last update of the World Economic Outlook in January… The magnitude and speed of collapse in activity that has followed [after countries implemented quarantines and social distancing practices to contain the pandemic] is unlike anything experienced in our lifetimes,” the IMF said.
IMF said this made the Great Lockdown the worst recession since the great depression, and far worse than the global financial crisis.
It said assuming the pandemic fades in the second half of 2020 and that policy actions taken around the world are effective in preventing widespread firm bankruptcies, extended job losses and system-wide financial strains, global growth is projected to rebound to 5.8 percent in 2021.
The IMF said the cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around $9 trillion, greater than the economies of Japan and Germany combined.
IMF said the large, timely and targeted fiscal, monetary, and financial policies already taken up by many policymakers “have been lifelines to households and businesses.”
It said it is actively deploying its $1-trillion lending capacity to support vulnerable countries. It also called on official bilateral creditors to do the same.
In its projection for the Asean-5 where the Philippines belongs, IMF sees growth to contract this year to -0.6 percent from 4.8 percent last year, before expanding by 7.8 percent in 2021.