World Bank downgrades economic outlook for Philippines to 3.0%

Philippine economic growth is expected to decelerate to 3.0% this year, the weakest in over a decade, given the impact of the coronavirus disease 2019 (COVID-19) on the country.

"Real GDP growth is projected to significantly decelerate from 5.9% in 2019 to 3.0% in 2020 due to the impact of the COVID-19 outbreak and the associated community quarantine," the World Bank said in its "East Asia and Pacific in the Time of COVID-19" report released Tuesday.

The latest baseline forecast — a downgrade from the earlier projection of 6.6% —assumes that the Philippines will slowly return to normal business operations by the third quarter of the year.

Should this be realized, it will be the weakest performance of the Philippine economy in over a decade since the gross domestic product (GDP) grew by 1.1% in 2009.

According to the World Bank, the latest forecast comes as production was limited due to the enhanced community quarantine (ECQ) that closed down businesses and government agencies in Luzon, which account for 70% of national GDP.

From 12:00 a.m. on March 17, the entirety of Luzon was placed on enhanced community quarantine until April 13, 2020, restricting travel within the region in efforts to contain the spread of COVID-19.

"Domestic consumption is expected to slow down sharply in the first half of 2020. In addition, implementation of a public infrastructure program is expected to be delayed and private sector investment to be postponed," the World Bank said.

"Export of goods and services are also expected to be negatively impacted with the imposition of travel restrictions globally and the production disruption experienced in China in which the Philippine electronic sector has a strong linkage," it elaborated.

The World Bank noted, however, that downside risks to growth could include a rapid surge in confirmed cases that may result in a prolonged community quarantine, effectively extending disruptions to government and business activities.

As of Monday, March 30, 2020, the Philippines recorded a total of 1,546 confirmed cases of COVID-19. This number includes 42 recoveries and 78 deaths.

"External risks could derive from a prolonged containment of the virus globally, leading to a global recession which will impact the Philippines through manufacturing, trade, tourism, and remittance channels," said the World Bank.

"Such a scenario might take an even more significant toll on those who work in the informal sector, who are likely to suffer a more significant welfare loss," it added. —KG, GMA News