ADB CUTS PHL GROWTH FORECAST ON PANDEMIC
THE Philippine economy is projected to post a deeper contraction this year due to the slower-than-expected growth of household consumption and investment, according to the Asian Development Bank (ADB).
In an Asian Development Outlook Supplement, the ADB said the economy is expected to contract 3.8 percent this year. This is lower than the 2-percent growth initially forecasted by the Manila-based multilateral development agency.
The new forecast of ADB is also lower than the government’s own outlook which projects Philippine GDP to contract anywhere from 3.4 percent to 2 percent this year.
“The forecast for 2020 is revised down to 3.8 percent contraction because household consumption and investment have slowed more than expected. The contraction in the global economy will continue to drag external trade, tourism and remittances,” the ADB said.
The ADB, however, maintained its growth outlook next year at 6.5 percent, as well as its inflation forecast of 2.2 percent this year and 2.4 percent in 2021.
The Manila-based multilateral development bank’s GDP outlook for next year is also slower than the 8 percent to 9 percent forecast of the national government.
The inflation outlook of the ADB, meanwhile, is within the government’s estimates. For 2020, the government projects inflation to be around 1.75 percent to 3.75 percent and for 2021, 2 percent to 4 percent.
“The forecast for 2021 is maintained at 6.5 percent, supported by public infrastructure spending and anticipated recovery in consumer and business confidence,” ADB said.
“Inflation forecasts for this economy are maintained, however, as lower oil prices offset possibly higher prices for food from feared domestic supply disruption,” it added.
The ADB also revised downward its growth projections for the whole of Southeast Asia. The regional economy is expected to contract by 2.7 percent this year before growing by 5.2 percent in 2021.
Contractions are forecast in key economies as containment measures affect domestic consumption and investment, including Indonesia at 1 percent and Thailand at 6.5 percent.
Thailand will post the steepest GDP contraction among Southeast Asian countries. This will be followed by Singapore with a contraction of 6 percent and Cambodia at 5.5 percent.
ADB data showed that Vietnam, which is forecast to grow 4.1 percent in 2020, will be the fastest growing economy in Southeast Asia this year.
This is followed by Brunei Darussalam at 1.4 percent and Myanmar at 1.8 percent. These countries, including Vietnam, are the only countries in Southeast Asia that will post a growth in 2020.
“Economies in Asia and the Pacific will continue to feel the blow of the Covid-19 pandemic this year even as lockdowns are slowly eased and select economic activities restart in a ‘new normal’ scenario,” said ADB Chief Economist Yasuyuki Sawada.
“While we see a higher growth outlook for the region in 2021, this is mainly due to weak numbers this year, and this will not be a V-shaped recovery. Governments should undertake policy measures to reduce the negative impact of Covid-19 and ensure that no further waves of outbreaks occur,” he said.
The supplement to the ADO 2020 released in April forecasts growth of only 0.1 percent for the entire developing Asian countries in 2020.
This is down from the 2.2-percent forecast in April and would be the slowest growth for the region since 1961. Growth in 2021 is expected to rise to 6.2 percent, as forecast in April.
The ADB said GDP levels in 2021 will remain below what had been envisioned and below pre-crisis trends.
Excluding the newly industrialized economies of Hong Kong, China; the Republic of Korea; Singapore; and Taipei, China, developing Asia is forecast to grow 0.4 percent this year and 6.6 percent in 2021.