World Bank sees Philippine economy to shrink by 1.9% in 2020

Multilateral lender World Bank is projecting that the Philippine economy will contract by 1.9% in 2020 due to the impact of the coronavirus disease 2019 (COVID-19) pandemic.

In its latest June 2020 Global Economic Prospects report released Monday night, the Washington-based lender said the Philippines, along with Southeast Asian peers Malaysia and Thailand, “experiences the biggest contractions this year.”

In a virtual forum on Tuesday, World Bank senior economist for the Philippines Rong Qian noted that the 1.9% economic contraction for the country already took into consideration the relaxation of quarantine measures in the second half.

The government has shifted the quarantine in Metro Manila and most of the country to more relaxed measures such as the general community quarantine and modified general community quarantine beginning June 1.

The World Bank’s outlook, however, is lower than the projection of the government’s economic team which sees that the country’s gross domestic product will shrink between negative 2,0 to 3.4% due to COVID-19 impact.

The lender said its projection “reflects domestic shutdowns, reduced tourism, disrupted trade and manufacturing, and spillovers from financial markets.”

Before the pandemic, the World Bank expected in its January 2020 report that the Philippine economy will grow 6.1%.

Qian said the Philippines was among the largest down revision of economic projection in the East Asia and Pacific since “the Philippines imposed very strict community quarantine and other countries are not doing that.”

However, it noted that “the outbreak appears to have largely subsided in China, Malaysia, and Vietnam but has not yet peaked in some regional economies (Indonesia, the Philippines).”

The lender also took note that the Philippines as well as Indonesia has unveiled “sizable fiscal stimulus packages ranging around 3-5% of the GDP.”

Nevertheless, the World Bank said the Philippine economy will revert to growth at an estimated 6.2% in 2021. 

Qian said the country’s digital infrastructure will play a critical role in its economic recovery.

“Measures that restrict mobility, regulate physical contact, and limit business activity have forced more businesses and families to use the internet for transactions,” she said.

“This change in consumer behavior and firm operations is expected to continue even after quarantines end. To take full advantage of this situation and help the economy in recovering from the losses it has suffered due to the lockdown, the country must ramp up its efforts to accelerate the digitalization of the economy,” she added. — RSJ, GMA News