The International Monetary Fund on Tuesday reduced its 2021 growth forecast for the Philippines to 3.2 percent from a previous assumption of 5.4 percent, taking into account the lingering impact of the COVID-19 pandemic.
The latest figures were contained in the World Economic Outlook: Recovery During a Pandemic report for the month of October released by the IMF to the media. The 3.2-percent forecast is below the government’s official gross domestic product growth target range of 4 percent to 5 percent this year.
Next year, the IMF also reduced its growth forecast to 6.3 percent from 7 percent it made in June 2021.
Thomas Helbling, IMF mission chief for Indonesia and Philippines, said in a statement the sizeable reduction in the forecast for real GDP growth in 2021 to 3.2 percent reflected two main factors.
“Real GDP growth in 2021Q2 [second quarter] was weaker than expected by IMF staff. Instead of increasing by 0.5 percent [quarter on quarter, on a seasonally adjusted basis], it declined by 1.3 percent… This outcome seems to reflect a stronger negative impact of the second COVID 19 wave,” Helbling said.
Helbling said the economic recovery in the second half was expected to be slower than previously expected, because of a third wave of COVID 19 starting August and increased uncertainty.
“Continued policy support, vaccine roll-out and global growth will support a stronger economic recovery in 2022. The downward revision of real GDP growth to 6.3 percent in 2022 from 7.0 percent previously mainly reflects the mechanical impact of the weaker economic recovery in 2021,” Helbling said.
He said the progress in the vaccination program and continued monetary and fiscal policy support would be central to the economic recovery in the near term. A stronger global economy will be another crucial element to the economic recovery, he said.
The economy contracted by a record 9.6 percent in 2020, the worst GDP performance since World War 2. The economy rebounded in the second quarter this year with an expansion of 11.8 percent, ending a five-quarter technical recession that started in the first quarter in 2020.
The interagency Development Budget Coordination Committee composed of the heads of the Department of Finance, National Economic and Development Authority and Department of Budget and Management cut its growth forecast this year to a range of 4 percent to 5 percent from 6 percent to 7 percent previously, because of the impact of the latest rounds of enhanced community quarantines implemented in Metro Manila and adjacent provinces to curb the spread of the Delta variant of the virus.
An IMF team led by Helbling conducted virtual discussions with officials of Bangko Sentral ng Pilipinas, the economic cluster of the government and other public and private sector representatives about the Philippine economy for the 2021 Article IV Consultation from May 21 to June 11, 2021.
The IMF also said in the October WEO that the ASEAN-5—composed of Indonesia, Thailand, Vietnam, the Philippines and Malaysia—would likely grow this year by 2.9 percent, a rebound from the 3.4-percent contraction last year. Next year, the region is expected to grow 5.8 percent.
The global economy is projected to expand 5.9 percent in 2021 and 4.9 percent in 2022 (0.1 percentage point lower for 2021 than in the July 2021 World Economic Outlook Update.
“The downward revision for 2021 reflects a downgrade for advanced economies—in part due to supply disruptions—and for low-income developing countries, largely due to worsening pandemic dynamics. This is partially offset by stronger near-term prospects among some commodity-exporting emerging market and developing economies,” the IMF said.
Beyond 2022, global growth is projected to moderate to about 3.3 percent over the medium term.
Advanced economy output is forecast to exceed pre-pandemic medium-term projections—largely reflecting sizable anticipated further policy support in the United States that includes measures to increase potential.
Persistent output losses are anticipated for the emerging market and developing economy group due to slower vaccine rollouts and generally less policy support compared to advanced economies.
“The global economic recovery continues amid a resurging pandemic that poses unique policy challenges. Vaccinations have proven effective at mitigating the adverse health impacts of COVID-19,” the IMF said.
It said unequal access to vaccines, vaccine hesitancy and higher infectiousness left many people still susceptible, providing fuel to the pandemic.