The Philippine economy is expected to rebound from the 9.5-percent contraction in 2020, the deepest slump on record, as it resumes reopening of businesses on expectations that the arrival of vaccines would stop the spread of the coronavirus.
Data from the Philippine Statistics Authority showed that the gross domestic product sank 9.5 percent in 2020, despite the shallower contraction of 8.3 percent in the fourth quarter on the prolonged impact of the health crisis.
Meanwhile, the gross national income, which was formerly known as GNP, decreased by 12 percent in the fourth quarter and 11.1 percent in the whole of 2020, after the net primary income from the rest of the world went down by 53.2 percent in the fourth quarter and by 27.3 percent in 2020.
Following the release of latest economic data, the National Economic and Development Authority updated the 2017-2022 Philippine Development Plan, the country’s economic blueprint.
Under the updated PDP presented by NEDA Undersecretary for policy and planning Rose Edillon, economic managers retained the 2021 GDP growth target at 6.5 percent to 7.5 percent.
The government slightly adjusted the 2022 GDP growth target to a range of 6.5 percent to 7.5 percent from 8 percent to 10 percent announced last year by the Development Budget Coordination Committee.
“It is important to keep in mind that the emergence of new threats has only reinforced our commitment to our collective vision. Our long-term vision remains the same and has even become more pronounced now. We will manage this crisis and recover as quickly as possible,” said Edillon.
The gross national income is expected to expand by 5 percent to 6 percent for both 2021 and 2022, after contracting 12.3 percent in 2020.
NEDA also revised the poverty incidence target to a range of 15.5 percent to 17.5 percent from the previous goal of 13 percent to 15 percent. Unemployment rate is expected at 7 percent to 9 percent for both 2021 and 2022, lower than the average of 10.2 percent in 2020, but higher than the pre-pandemic level of 5.1 percent in 2019.
Meanwhile, the inflation rate target was maintained at 2 percent to 4 percent in 2021.
“We realize that many obstacles may come at any time between now and 2040. COVID-19 may just be one of these. It is important to quickly reclaim lost ground, ensure sustainability of the gains to prevent a reversal, and get back on track towards achieving AmBisyon Natin 2040,” Edillon said.
“The reality today is that the virus is not going to go away soon, and we will have to learn to live with it. We need to safely open our economy and address both COVID and non-COVID challenges—such as hunger, poverty, unemployment, and non-COVID-19 diseases,” said acting Economic Planning Secretary Karl Kendrick Chua.
“Our focus for the next two years is to build a healthy and more resilient Philippines as the foundation for the future. Our goal remains the same: to bring Filipinos closer to a strongly rooted, comfortable, and secure life. To achieve this, the Updated PDP’s strategies have been adapted to respond to the needs of today while preparing for the requirements of tomorrow,” said Chua.
Chua said the pandemic last year disrupted the country’s growth momentum. “We started 2020 with a strong foundation and the country was likely to become an upper-middle income country in 2020 if not for COVID-19. Between 2015 and 2018, poverty fell from 23.5 percent to 16.7 percent of the population, lifting six million Filipinos from poverty, or four years ahead of our 2022 target,” he said.
He said key reforms, such as the Rice Tariffication Law, helped stabilize inflation within the government’s target of 2 percent to 4 percent, while the comprehensive tax reform program expanded the fiscal resources, pushing the revenue-to-GDP ratio to 16.1 percent in 2019 and reducing the debt-to-GDP ratio to 39.6 percent.
“Then came COVID-19. This disrupted our growth momentum and development trajectory. To address this unprecedented crisis, the government made the difficult decision of imposing community quarantines last year up to this year as it put a premium on saving lives and protecting communities from the virus, while beefing up our healthcare capacity. This is, of course, not without any consequence,” he said.
Chua said that with border restrictions in the second quarter of 2020, the GDP fell by 16.9 percent and the unemployment rate climbed to 17.7 percent. Improvements followed the gradual easing of restrictions in the succeeding quarters.
“By the fourth quarter of 2020, our economy performed better with a smaller GDP contraction of 8.3 percent while unemployment rate dropped to 8.7 percent. This performance brings our full-year GDP contraction to 9.5 percent, which is at the low end of the DBCC estimate of -8.5 to -9.5 percent for 2020,” Chua said.
The International Monetary Fund also expects the Philippine economy to rebound 6.6 percent this year and 6.5 percent in 2022.
IMF resident representative to the Philippines Yongzheng Yang said the Philippines benefited from a steady flattening of the infection curve since end-September 2020. He noted the authorities’ efforts to prepare for the rollout of the vaccine.
“However, like in most other countries, vaccination is a gradual process and social distancing will persist in 2021. Overall, we expect a robust recovery in 2021-2022 as shown by numbers above, with progress on vaccination and a steady reopening of the economy,” Yang said.
The IMF said that amid exceptional uncertainty, the global economy was projected to grow by 5.5 percent in 2021 and 4.2 percent in 2022. “The projected growth recovery this year follows a severe collapse in 2020 that has had acute adverse impacts on women, youth, the poor, the informally employed and those who work in contact-intensive sectors,” the IMF said.
The global growth contraction for 2020 is estimated at -3.5 percent, or 0.9 percentage point higher than projected in the previous forecast, reflecting stronger-than-expected momentum in the second half of 2020.