WB warns COVID-19 to slow PH economy significantly

The World Bank said that the economic impact of the coronavirus disease (COVID-19) pandemic on the Philippines will depend on the effectiveness of government measures in controlling the spread of the virus.

Based on the East Asia and Pacific Economic Update report released yesterday, the Washington-based lender said that the Philippines’ gross domestic product (GDP), in a best case scenario, may grow by 3.0 percent this year.

But should the COVID19 pandemic in the country is not immediately contained, the World Bank said the economy would contract by 0.5 percent at worst in 2020.

Last year, the country’s economy expanded by 5.9 percent.

According to the World Bank, the largest drag on growth is the

Luzon-wide enhanced community quarantine that restricted all nonessential movement of people and closed down businesses and government agencies until April 14. The Luzon lockdown, accounting for 70 percent of GDP, will sharply slowdown domestic consumption in the first-semester as well as delay the implementation of public infrastructure program and private sector investment. 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.

“Travel bans and the COVID19 outbreaks in overseas Filipino workers-destination countries are likely to affect the inflow of remittances in 2020, further damping domestic consumption growth,” the World Bank said.

Nevertheless, the bank said that economic growth is expected to accelerate rapidly in 2021 and next as global conditions improve, along with more robust domestic activity bolstered by the public investment momentum and a boost from 2022 election-related spending.

Meanwhile, the Word Bank flagged risks and challenges for the Philippines, like the possibility of slow return to normalcy due to a rapid surge in confirmed cases resulting in a prolonged community quarantine.

In this case, the World Bank estimated that economic growth could contract in 2020 driven by a drastic slowdown in domestic consumption and investment, with echo effects into 2021.

“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,” the World Bank said.

“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,” the bank warned.

On the other hand, the World Bank urged the government for its timely execution of public investments, targeted financial support to the poor and vulnerable sectors to restore confidence and soften the negative impact of the pandemic.

“The Philippines should further strengthen its health care system and preparedness for potential public health shocks, while continuing to accelerate structural reforms to improve the business environment, foster competition, and boost productivity growth,” the World Bank said.

“Sustained support must be ensured for bills that improve competitiveness, such as the passage of the corporate income tax and incentives rationalization act, and amendments to the public services act,” it added.