OECD: PH economy to shrink 3.2% this year as virus woes linger
The Organization for Economic Cooperation and Development (OECD) has projected the Philippine economy to contract by 3.2 percent this year amid the pandemic.
In its “Economic Outlook for Southeast Asia, China and India 2020 Update: Meeting the Challenges of COVID-19” report released on July 31, the OECD noted the Philippines, together with India and Indonesia, is still facing a rising number of cases.
It noted the virus that causes COVID-19 is spreading fast in dense areas, specifically major cities and urban areas.
“This is particularly glaring in the Philippines, where Metro Manila (the National Capital Region) and Central Visayas account for close to 70 percent of total officially confirmed cases” while also accounting for 50 percent of the Philippine economy, OECD said.
The economic organization of developed countries added “China, Indonesia and the Philippines lead the region in terms of case fatality rate (deaths as a proportion of reported cases) … [which] may reflect the readiness and capability of health systems to handle the influx of COVID-19 patients.”
OECD projections as of June 26 showed the Philippines’ gross domestic product (GDP) would likely shrink by 3.2 percent this year before growing by 7 percent next year.
“Reigniting business remains challenging in the Philippines due to protracted uncertainty over the extent of COVID-19 cases. Flailing export earnings add to the headwinds for growth,” OECD said.
“With limited testing capacity five months into the pandemic and despite sizeable public fundraising for the cause, the Philippines is experiencing a protracted uncertainty over the extent of COVID-19,” OECD added.
OECD’s estimates were done before the Philippines last week announced that GDP contracted by a record 16.5 percent year-on-year during the second quarter—or at the height of the longest and most stringent lockdown in the region, sliding the economy to a 9-percent recession during the first half.
Amid the COVID-19 quarantine, “the considerable drag on business operations and infrastructure projects across the archipelago will mute economic performance in the second and probably third quarters,” OECD said.
Not only Filipinos here at home but also those working overseas would have a harder time, it added.
“Growing employment pressure faced by overseas workers, both land-based and sea-based, could erode remittance inflows and further restrain household spending. Repatriations will also challenge the ailing domestic labor market,” OECD warned, noting the Philippines last year received remittances from overseas Filipinos equivalent to 10 percent of GDP.
Moving forward, OECD said “leaving fiscal space for the upcoming monsoon season will be crucial to keep the crisis response system well-functioning and mitigate further socioeconomic costs.”
On the flipside, OECD said the Philippines and most of its Asean neighbors saw sharp increases in the adoption of digital transactions and payments during their respective lockdowns. In particular, registrations for internet banking accelerated in the country. Transaction value of digital banks and the number of transactions soared by 633 percent and 416 percent, respectively, after the lockdown was imposed in March. INQ
