Some 2.7 million Filipinos will join the ranks of the poor in 2020 due to the triple shock of the COVID-19 pandemic, the loss of jobs resulting from efforts to contain it, and a series of destructive typhoons, the World Bank said Tuesday.
This dire projection came as Congress appeared set to ratify a P4.5 trillion national budget for 2021 Wednesday aimed at addressing these problems.
In an online briefing, World Bank senior economist Rong Qian said the economy could contract 8.1 percent for the entire year, worse than the 6.9 percent decline in gross domestic product (GDP) it predicted in October.
She said the COVID pandemic was expected to slow down the pace of poverty reduction.
“The containment measures have disrupted economic activity resulting in income loss, decline in wage incomes, a slowdown in entrepreneurial activities and a fall in remittances. The poor and vulnerable are especially likely to experience significant welfare losses given their limited capacity to manage risks,” she said.
With the economy contracting and household income declining this year, poverty is estimated to increase from 20.5 percent in 2019 to 22.6 percent in 2020.
“The expected growth contraction in 2020 is likely to increase poverty in the short-term, resulting in 2.7 million additional poor people in 2020 compared to 2019 estimates, measured against the lower middle-income poverty line of $3.2 a day,” Qian said.
On the other hand, the economy could start to recover next year, posting growth of 5.9 percent in 2021 and 6 percent in 2022, if improved efforts to bring down virus transmission are sustained.
"The Philippine economy will rebound in the next two years," Qian said, adding that the gradual reopening of businesses could help the economy gradually recover in the coming months.
She said the GDP growth in the next two years would be supported by the recovery of domestic demand.
Qian said the pace of global economic recovery would also help the Philippines, especially in the area of remittances, which account for about 10 percent of GDP.
"The World Bank is positive about the remittances outlook. In the last few months, remittances rebounded compared to the previous months… We see this [trend] to continue," Qian said.
Ndiamé Diop, World Bank country director for Brunei, Malaysia, the Philippines and Thailand, said the series of devastating typhoons in November made 2020 a more difficult year for the Philippines.
Diop also warned about the possibility of a second wave of COVID-19 infections, just like elsewhere in the world. He urged everyone to be vigilant.
"While addressing the pandemic, authorities must focus on structural reforms to improve the business environment and fast-track digitalization… The Philippines will bounce back," Diop said.
Socioeconomic Planning Acting Secretary Karl Chua agreed that “poverty likely went up in 2020 temporarily due to COVID and quarantine before starting to fall in 2021.”
The National Economic and Development Authority (NEDA) chief earlier said that the government’s initial target of reducing poverty incidence to 14% by 2021 from P16.7% in 2018 will not be hit due to the COVID-19 pandemic.
“Key will be to open more of the economy to see income sources return,” Chua said in a text message to reporters.
The economy contracted by 10 percent in the first three quarters amid the pandemic. It went into a technical recession as early as the second quarter after the GDP in the first six months declined by 9 percent.
GDP contracted by 0.7 percent in the first quarter and declined further by 16.9 percent in the second quarter. The economy showed signs of recovery in the third quarter after GDP fell at a slower rate of 11.5 percent.
The interagency Development Budget Coordination Committee”•composed of the Department of Finance, Department of Budget and Management, National Economic and Development Authority and Bangko Sentral ng Pilipinas”•also projected a deeper contraction of 8.5 percent to 9.5 percent this year, taking into account the prolonged imposition of community quarantines in various regions to prevent the spread of the disease.
The previous GDP assumption of DBCC was a contraction of 5.5 percent this year.
The DBCC expects GDP to recover by around 6.5 percent to 7.5 percent in 2021 and 8 to 10 percent growth in 2022.
On Tuesday, the chairman of the House committee on appropriations, Rep. Eric Yap, said the Senate and the House were expected to ratify today (Wednesday) the bicameral panel report on the proposed P4.5 trillion national budget for 2021.
"We are just finalizing a few details of the report… and then we will have it reported in plenary tomorrow (Wednesday) and in the afternoon (of that day), both houses will ratify it," Yap said.
After the ratification by both chambers, Yap said the printing of the ratified budget documents will take 10 days before it is submitted to Malacañang for President Duterte's signature.
Yap said the 2021 national government budget is “pork-free.”
"Most of the changes in the proposed budget for next year are institutional amendments," Yap said but he did not give specific details.
He said the next year's national budget focused on providing more funding for the government's COVID-19 response and for the procurement of a working vaccine.
As for infrastructure projects, Yap said legislators reallocated funds for those that can be finished within 2021.
He also said that the budget contains funding for the rehabilitation of calamity-hit areas including Cagayan.
Speaker Lord Allan Velasco earlier sid the House contingent to 2021 budget bicameral committee would ensure that sufficient funding for the rehabilitation and recovery of communities affected by the recent typhoons will be included in the bicameral version of the budget bill, as well as for the other priority programs of the government like "Build, Build, Build."
"Our goal is to get the 2021 General Appropriations Bill on the President’s desk for his signature before the year ends, so we can prevent a reenacted budget that will not bode well for the economy and the entire nation," Velasco said.
The Palace said the Philippines will do better in 2021 as its economic managers have put together a recovery program.
Presidential spokesman Harry Roque noted that the World Bank’s report meant more Filipinos will suffer this year.
“We can do this. We will rise above this. We will do better in 2021,” Roque said.