The International Monetary Fund said Tuesday it revised its 2020 gross domestic product forecast for the Philippines to a deeper contraction of 8.3 percent from a previous estimate of a 3.6-percent decline in June on the prolonged impact of the COVID-19 pandemic.
IMF resident to the Philippines Yongzheng Yang said the downward revision of the 2020 growth forecast for the Philippines mostly reflected a larger-than-expected downturn in the second quarter and a more gradual resolution of the pandemic as witnessed over the past months, with prolonged social distancing.
“Despite a somewhat softer global contraction expected in the October WEO [World Economic Outlook], weak public confidence and low remittances in the Philippines as a result of the pandemic are expected to continue weighing on private investment and consumption,” he said.
“The negative impacts of COVID 19 are expected to be only partially offset by policy support,” Yang said in an emailed statement when sought for comment.
The latest projection was contained in the October World Economic Outlook released to the media on Tuesday.
This put the Philippines with the worst expected GDP decline this year among ASEAN-5 countries. It is followed by Thailand, with -7.1 percent; Malaysia, -6 percent; and Indonesia, -1.5 percent. Vietnam (1.6 percent) is the only country in the group that is expected to grow this year.
ASEAN-5 economies are seen to contract this year by 3.4 percent, before expanding 6.2 percent next year.
IMF said Malaysia in 2021 is expected to post the fastest growth of 7.8 percent, followed by the Philippines, 7.4 percent; Vietnam, 6.7 percent; Indonesia, 6.1 percent; and Thailand, 4 percent.
The GDP estimate for the Philippines next year of 7.4 percent is faster than the previous forecast of 6.8 percent made in June.
The Philippines entered technical recession after GDP contracted by 9 percent in the first half, following the 0.7-percent decline in the first quarter and the deeper 16.5-percent contraction in the second quarter.
This prompted economic managers to revise their GDP estimate this year to a contraction of 5.5 percent, worse than their earlier projection of a 2 percent to 3.4-percent decline.
Economic managers expect the economy to recover and grow between 7 and 8 percent next year, with the expectation that the health crisis would dissipate by that time.
The IMF said global growth is projected at –4.4 percent in 2020, or 0.8-percentage point above the June 2020 WEO Update forecast.
“The stronger projection for 2020 compared with the June 2020 WEO Update reflects the net effect of two competing factors: the upward impetus from better-than-anticipated second-quarter GDP outturns [mostly in advanced economies] versus the downdraft from persistent social distancing and stalled reopenings in the second half of the year,” the IMF said.
It said recovery had taken root in the third quarter and was expected to strengthen gradually in 2021.
“The recovery is likely to be characterized by persistent social distancing until health risks are addressed—and countries may have to again tighten mitigation measures depending on the spread of the virus,” it said.
Global growth is projected at 5.2 percent in 2021, or 0.2 percentage point lower than in the June 2020 WEO Update. It said the projected 2021 rebound following the deep 2020 downturn implied a small expected increase in global GDP over 2020–21 of 0.6 percentage point relative to 2019.
It said the advanced economy group would likely contract 5.8 percent in 2020, 2.3 percentage points stronger than in the June 2020 WEO Update.
The upward revision reflects, in particular, the better-than-foreseen US and euro area GDP outturns in the second quarter.
The advanced economy growth rate is projected to strengthen to 3.9 percent in 2021. The US economy is projected to contract by 4.3 percent this year, before growing 3.1 percent next year.