IMF cuts 2020 PH growth forecast to 0.6%, expects unemployment to rise amid COVID-19 pandemic
MANILA, Philippines – The COVID-19 pandemic would not only slow the Philippines’ economic growth to a dismal 0.6 percent but also render more Filipinos jobless this year, the Washington-based International Monetary Fund (IMF) said.
With slower gross domestic product (GDP) expansion, the unemployment rate in the Philippines was projected to climb to 6.2 percent in 2020 from 5.1 percent in 2019 before falling to 5.3 percent in 2021, the IMF’s World Economic Outlook (WEO) April 2020 report released Tuesday showed.
The IMF nonetheless expects inflation this year to ease to 1.7 percent this year from 2.5 percent last year, even as the rate of increase in prices of basic commodities in the Philippines could rise to 2.9 percent next year.
Amid the COVID-19 pandemic, the Philippines’ current account deficit was expected to widen to 2.3 percent of GDP this year from 0.1 percent last year.
In an e-mail to the Inquirer, IMF resident representative in the Philippines Yongzheng Yang attributed the bleaker economic outlook mainly to “supply disruptions related to COVID-19 and weaker demand in the Philippines’ major trading partners.”
“Tighter global financial conditions, weaker public confidence, and lower remittances are also expected to weigh on private consumption and investment. The negative impacts of COVID-19 are expected to be partially offset by policy support. The virus outbreak is assumed to peak in the second quarter of 2020, leading to a gradual recovery in the second half of the year. Growth is projected to rebound from a low 2020 base to 7.6 percent in 2021,” Yang said.
Asked if the ongoing and expanded enhanced community quarantine imposed in Luzon and other areas across the country was a good thing or a bad thing as far as the economy was concerned, Yang replied: “Stemming the spread of COVID-19 is of utmost importance. Policies at the moment should focus on both protecting public health and putting people back to work, but getting the virus under control is, if anything, a prerequisite to saving livelihoods. By acting forcefully now with strong actions to stop the spread of infections, complemented by strong economic policy actions to support people and businesses, the crisis can be ended sooner with less human and economic cost.”
Also, Yang said the IMF “[welcomes] the [Philippine] authorities’ fiscal and monetary policy responses to the impact of COVID-19.”
On Tuesday, Finance Secretary Carlos G. Dominguez III reported to Congress that the Philippines’ war chest against COVID-19 contained in the Duterte administration’s four-pillar socioeconomic strategy now amounted a total of P1.45 trillion—P583.8 billion in emergency support for vulnerable groups; P35.7 billion in expanded medical resources to fight the disease and ensure frontliners’ safety; P610 billion in additional concessional financing, including P310 billion in loans from multilateral and bilateral lenders; and P220.5 billion in other monetary and fiscal initiatives.
“Owing to prudent macroeconomic management, the Philippines has built considerable policy buffers in recent years, and both the government and the Bangko Sentral ng Pilipinas (BSP) have been making good use of this policy space. The country has ample room for additional policy stimulus, if needed, given the relatively low level of public debt and well-anchored inflation expectations,” Yang said.
“We welcome the financial assistance extended to vulnerable households and workers as well as the health care sector. Healthcare workers are on the frontline of fighting the pandemic, and the poor are the most vulnerable to the impact of crises like this pandemic. Given this, it is critical to respond promptly and forcefully to the needs of the poor and the vulnerable, as well as the healthcare sector. We welcome the government’s P200-billion cash aid program to help 18 million low-income households,” Yang added.
In a separate report titled “How Two Tests Can Help Contain COVID-19 and Revive the Economy,” World Bank economists Damien de Walque, Jed Friedman, Roberta Gatti and Aaditya Mattoo said that “if countries like the Philippines could build at least some capacity to test soon, they may begin to consider an eventual phase-out of restrictions without fear of the disease escalating or recurring.”
Referring to the two COVID-19 tests, namely the polymerase chain reaction (PCR) assay and the antibody test, the World Bank said that in general, “the expansion of both types of testing, and incorporation in transmission control strategies, may yield significant returns.”
In the case of the Philippines, the World Bank said that using the PCR assay will have “potentially high net benefits if it can lead to early phase-out of economically costly suppression measures for all or for subgroups.”
As for the antibody test, the World Bank said it would have “potentially high net benefits if it can allow dilution of restrictions and revive critical segments of the economy” if rolled out in the Philippines.
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