ADB downgrades further economic forecast for Philippines in 2020

The Asian Development Bank (ADB) has downgraded its economic forecast for the Philippines this year, expecting it to shrink further still due to the impact of the COVID-19 pandemic on consumption and investments.

In its Asian Development Outlook update released Thursday, the Manila-based multilateral lender said it expects the Philippines’ gross domestic product (GDP) for 2020 to contract by 8.5% “because household consumption and investment have fallen more than expected.”

The ADB’s latest projection for the Philippine economy is a downward revision from its -7.3% forecast last September.

Its forecast is in line with Duterte administration’s economic managers’ revised outlook of -8.5 to -9.5% for this year due to “prolonged imposition of community quarantines in various regions in the country.”

The Manila-based lender’s assumption is slightly higher than the World Bank’s -8.1% outlook for the Philippines this year.

The ADB noted that the Philippine economy contracted by 10.0% in January to September 2020, “reflecting muted consumer and business activity and confidence under the pandemic.”

The Philippine economy remained in negative territory during the third quarter, clocking in at -11.5% as the country continues to reel from the COVID-19 pandemic’s economic fallout.

“With unemployment improving but still high at 10.0% in July, a decline in household consumption eased from 15.3% in the second quarter to 9.3% in the third quarter as the economy gradually reopened and remittances from overseas workers rebounded,” the ADB said.

“The unemployment rate improved further to 8.7% in October,” it said.

Meanwhile, fixed investment fell by 36.5% in the second quarter and 37.1% in the third quarter.

“Government consumption continued to increase but at a decelerated pace. Exports contracted less than imports, mitigating GDP contraction,” the ADB said.

National Economic and Development Authority’s (NEDA) Acting Secretary Karl Chua earlier said the key to recovery “will be to open more of the economy to see income sources return.”

The Philippines has been under lockdown for nearly nine months, after the first restrictions were implemented in March to curb the spread of COVID-19.

A general community quarantine (GCQ) has remained in place in Metro Manila and other key areas, and just this week was extended to last until the end of the year.

The ADB maintained its Philippine GDP forecast for 2021 at 6.5% growth, “assuming that public investment picks up and the global economy recovers.”

The overall forecast for Developing Asia - 46 ADB member economies across Asia and the Pacific - is a contraction of 0.4% in 2020, less than the 0.7% estimated in September.

Growth will rebound to 6.8% in 2021, but output will remain below what was envisioned before the pandemic, the lender said.

In Southeast Asia, a contraction of 4.4% is now expected this year from previous estimate of 3.8%, and growth in 2021 is anticipated at 5.2% instead of 5.5%.—AOL, GMA News