World Bank: PH growth to hit 3%

THE World Bank trimmed its growth forecast for the Philippine economy this year because of the impact of the coronavirus disease 2019 (Covid-19) and the Luzon-wide enhanced community quarantine on domestic output.

In a report, the Washingtonbased multilateral lender said “real GDP ( gross domestic product) growth is projected to significantly decelerate from 5.9 percent in 2019 to 3.0 percent in 2020 due to the impact of the Covid- 19 [ pandemic] and the associated community quarantine.”

If correct, the revised outlook would fall below the 6.5- to 7.5- percent 2020 growth target of the government, and would be the slowest since the 1.1-percent expansion in 2009.

The downgraded figure is lower than Fitch Solutions’ 4.0 percent, S&P Global Ratings’ 4.2 percent, Moody’s Investors Service and Union Bank of the Philippines’ 5.4 percent, ING Bank Manila’s 5.6 percent, and Rizal Commercial Banking Corp.’s below 6.0 percent; but higher than ANZ Research’s 1.2 percent and Nomura’s 1.6 percent.

The World Bank noted that the quarantine restricted all nonessential movement of people and closed down businesses and government agencies in Luzon, which accounted for 70 percent of national GDP.

Imposed by the government on March 16, the month-long lockdown — which aimed to contain the spread of the coronavirus in the country —resulted in the temporary closure of businesses except those providing essential services in the areas of health, food and logistics.

“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.

It added that the export of goods and services were also expected to be negatively impacted with the imposition of travel restrictions globally and the production disruption in China, with which the Philippine electronic sector had a strong linkage.

The World Bank also said travel bans and Covid-19 outbreaks in overseas Filipino workers (OFW)destination countries could affect the inflow of remittances in 2020, further damping domestic consumption growth.

Last year, an all- time- high $33.46 billion in remittances were sent home by OFWs.

“Risks to the baseline forecast, which assumes that the Philippines [would] slowly return to normal business operations by Q3 (third quarter), include a rapid surge in confirmed cases resulting in a prolonged community quarantine, lengthier disruptions to government and business activities, loss of incomes, and a protracted weakening of the public health system,” the World Bank said.

It added that, if this was the case, Philippine economic growth could contract by 0.5 percent in 2020, driven by a drastic slowdown in domestic consumption and investment, with echo effects into 2021.