The International Monetary Fund expects the Philippine economy to contract by 3.6 percent this year, a significant downward revision from its April estimate of a 0.6-percent expansion on the devastating impact of the coronavirus disease 2019 pandemic.
“The growth forecast for 2020 is -3.6 percent. This downward revision is mostly attributable to larger-than-expected supply disruptions related to COVID-19 and weaker demand in major trading partners,” IMF resident representative to the Philippines Yongzheng Yang said when asked for comment on the latest growth outlook for the country in line with the release of the June 2020 World Economic Outlook.
He said that based on the information that has become available since the April WEO forecasts, the resolution of COVID-19 would be more gradual, and hence the impact of the pandemic on the economy would be larger than previously anticipated.
“With the latest downgrade of the global outlook, the external environment for the Philippines has also worsened, posing additional headwinds to growth this year,” Yang said.
The June 2020 WEO report said global growth was projected at –4.9 percent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook forecast. It said the COVID-19 pandemic had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery was projected to be more gradual than previously forecast.
“In 2021 global growth is projected at 5.4 percent. Overall, this would leave 2021 GDP some 6½ percentage points lower than in the pre-COVID-19 projections of January 2020. The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s,” it said.
The report said the United States, the biggest economy in the world, would contract by 8 percent in 2020; the Euro area by -10.2 percent; and Japan by -5.8 percent. China is seen to modestly grow by 1 percent.
The ASEAN-5, composed of Indonesia, Malaysia, the Philippines, Thailand and Vietnam, is expected to contract by 2 percent. Indonesia is seen to contract by 0.3 percent; Malaysia by -3.8 percent; and Thailand by -7.7 percent.
The inter-agency Development Budget Coordination Committee—composed of the Department of Finance, Department of Budget and Management, National Economic and Development Authority—said the Philippine economy would contract this year between 2 percent and 3.4 percent from the actual 6-percent expansion in 2019.
The projection was way below the earlier forecast of a 6.5 percent to 7.5 percent growth for 2020 that was made before the onset of the pandemic.
NEDA estimated that the potential impact of the health crisis on the economy could reach P2 trillion or about 9.4 percent of GDP this year.
The GDP contracted by 0.2 percent in the first quarter, a reversal of the 5.7-percent growth a year ago, and 6.4 percent in the fourth quarter of 2019. Economists said the second-quarter numbers could be more disappointing because the lockdowns encompassed almost the entire period.
The DBCC expects the economy to recover strongly in 2021, with GDP growing by 7.1 percent to 8.1 percent on anticipation that the pandemic would be over by that time and that economic activities would normalize.