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Wednesday, February 21, 2024

World Bank reduces 2021 PH growth forecast to 4.7%

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The World Bank said Tuesday it reduced the previous 5.5-percent growth projection for the Philippines this year to 4.7 percent, following the re-imposition of strict community quarantine in the second quarter and the 4.2-percent contraction in the first quarter.

“There are some things that we considered when we made this projection. First, we saw what happened in the first quarter [when] growth was weaker than expected…. That is one consideration…,” World Bank senior economist Kevin Chua said in an online briefing on the latest Philippine Economic Update.

“We have also seen the imposition of quarantine measures alongside the increase in COVID-19 cases in the second quarter,” Chua said. He said these two developments significantly impacted domestic activity.

The country’s gross domestic product contracted 4.2 percent in the first quarter, deeper than the 0.7-percent slump a year ago when the health crisis was starting to wreak havoc on the economy.

The 4.2-percent contraction in the period was an improvement from the 8.3-percent decline in the fourth quarter, which brought the full-year 2020 GDP contraction to a record 9.6 percent, the worst since the end of World War 2.

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The World Bank’s revised projection was nowhere near the 6 percent to 7 percent GDP growth earlier made by the interagency Development Budget Coordinating Committee composed of the Department of Finance, National Economic Development Authority and the Budget Department.

The multilateral lender also cut the 2022 growth forecast to 5.9 percent from 6.3 percent and the 2023 growth estimate to 6 percent from 6.2 percent.

Finance Secretary Carlos Dominguez III earlier said the domestic economy could gather steam in the second quarter, as the latest surge in coronavirus infections had subsided and the government started to rapidly expand mass vaccination against COVID-19.

Dominguez told a business forum that if overseas manufacturers were able to deliver the volume of vaccines as committed and planned, the Duterte administration would have enough doses to inoculate not only the 70 million Filipino adults, but also about 15 million teenagers once an anti-COVID-19 shot for them was approved by the Food and Drug Administration.

If this happens, then the country can expect a significant containment of infections by the second half of 2021, Dominguez said.

The World Bank noted that the resurgence of COVID-19 cases and rising inflation derailed the early signs of economic rebound in 2021. As lockdown restrictions eased in early 2021, people’s mobility stepped up, and employment and earnings of families gradually improved.

It also said that the pandemic badly hit poor families and the health and schooling of children. A recent World Bank household survey showed that two in five households were worried about not having enough food for the ensuing days.

Households reported difficulty accessing health services due to a lack of income. Three in five households cited this as a reason for not obtaining much-needed medical treatment.

Most households reported that their school-aged children were enrolled in school, but the effectiveness of distance learning was a big concern especially among poor households. Only 40 percent of the poorest households had internet access, compared to 70 percent among the richest households.

Chua said the effective delivery of social protection programs would help reduce the extent to which the crisis adversely affected poor and vulnerable families.

“COVID-19 pandemic-related shocks, including hunger incidences, have already manifested in higher levels of child malnutrition, especially among the poor,” said Chua.

“Social programs, including cash transfers, can help alleviate food and subsistence conditions. National and local government authorities need to coordinate their efforts to ensure timely and efficient deployment of these programs,” he said.

The PEU also stresses that mobilizing private sector participation in infrastructure projects will be important as the government faces limited fiscal space in the near term due to slower growth. The report adds that rules on foreign direct investments remain restrictive in the Philippines. Allowing greater foreign participation in the economy can help improve infrastructure and strengthen economic growth, it said.

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