The Philippines’ gross domestic product (GDP) is seen by the Asian Development Bank (ADB) to slide by a faster 7.3 percent this year after a worse-than-expected recession at the height of the longest and most stringent COVID-19 lockdown in the region.
The ADB nonetheless expects Philippine GDP to rebound in 2021 with a 6.5-percent growth—the fastest in Southeast Asia alongside Malaysia—as the semiconductor export sector benefit from a global trade recovery on the back of a more technology-driven “new normal” postpandemic.
The Manila-based multilateral lender’s Asian Development Outlook update report released on Tuesday showed that its latest estimated drop in the Philippines’ GDP for 2020—worse than the earlier forecast of a 3.8-percent contraction in April as well as a faster decline than the government’s projection of 4.5-6.6 percent—was second-worst in the region, just behind Thailand’s projected 8-percent fall.
Across the Asia-Pacific region, the ADB said economies would have a “slow and painful” recovery from the COVID-19 pandemic especially as countries like the Philippines and Indonesia grapple with a still rising number of infections.
In the case of the Philippines, the ADB said “the growth projection for 2020 is downgraded after steep contraction in private consumption and investment drove a sharp recession in the first half of 2020,” noting that “widespread and stringent lockdowns to contain the spread of COVID-19 in the community impeded economic activity.”
However, as COVID-19 quarantine gradually eased and the economy further opened up, the ADB said “the economic contraction may have bottomed out in May or June and a net 7.5 million jobs were restored by July,” when the government reported that the unemployment rate declined to 10 percent from a record 17.7 percent last April.
“The package of measures the government rolled out such as income support to families, relief for small businesses and support to agriculture in the second quarter all helped the economy to bottom out. We expect the recovery to be slow and fragile for the rest of this year and growth to accelerate in 2021 on the back of additional fiscal support and an accommodative monetary policy stance,” ADB country director for the Philippines Kelly Bird said.
For the rest of the year, consumer confidence and business sentiment were expected to slowly recover in the second half of 2020 as the government’s fiscal stimulus measures gain traction, community quarantine restrictions are further eased and unemployment falls further, the ADB said.
Also, the ADB estimated remittances from Filipinos working and living abroad to plunge by 20.2 percent this year such that the impact on household spending is expected to be huge as these cash inflows accounted for a tenth of GDP while 8 percent of Filipino families relied on remittances.
But under a scenario that a vaccine will be available to contain the coronavirus by next year, the Philippines is poised for an economic rebound partly as it “entered the crisis with room for fiscal policy support,” the ADB said. INQ