Bangko Sentral ng Pilipinas Governor Benjamin Diokno said avoiding a second-wave or third-wave COVID-19 infection is key to a “U-shaped” economic recovery for the Philippines this year.
In an interview over ANC on Monday, Diokno expressed optimism the forecast of the interagency Development Budget Coordination Committee of an economic contraction of between 2 percent and 3.4 percent this year might hold, unless there was a second or third wave of infection.
“A lot of things depend on the behavior of the Filipino people. If we can avoid a second wave or a third wave, the forecast will be steady. That means a U-shaped recovery…, “ Diokno said.
“But in case there is a second wave, that could mean a W-shaped recovery. That will be much worse than the revised forecast,” he said.
Diokno also considered as “positive” a big chunk of the country was under a modified quarantine status.
“… Unless there is a deterioration in those hotspots, I think we are ready towards our move for normalization. So I am optimistic that the forecast right now of DBCC might hold, unless there is a serious second or third wave,” he said.
DBCC earlier this month predicted the economy to contract between 2 percent and 3.4 percent this year, a sharp reversal from the 6-percent expansion in 2019, due to the debilitating impact of the COVID-19 pandemic.
The projection was way below the earlier forecast of a 6.5-percent to 7.5-percent growth for 2020 that was made before the onset of COVID-19 in the latter part of last year.
Diokno said the 2-percent contraction was based on the effectiveness and the early deployment of both fiscal and monetary responses to the pandemic. He said the BSP had done a lot of anticipatory measures in the monetary side and that it was looking at how it was easing the liquidity in the market.
“Whether it is helping what sector. In the fiscal side, they have also deployed a lot of initiatives so let’s see how it works,” he said.
Diokno further said amid the health crisis, the banking industry remained well capitalized and their asset quality was quite high.
“So in the banking industry, we don’t see any major problem. Except of course, there are some industries like the rice industry and the tourism industry that might be affected…, “ he said.
Estimates of the National Economic and Development Authority show the potential impact of the pandemic on the economy could reach P2 trillion in losses or about 9.4 percent of the GDP this year.
The GDP in the first three months of the year contracted 0.2 percent, a reversal from 5.7 percent in the same period last year, and 6.4 percent in the fourth quarter of 2019, pulled down by the pandemic.
But Neda expressed optimism the economy will rebound strongly in 2021.
“Timely implementation of a well-targeted recovery program, alongside efforts of the private sector, will mitigate the impact of the COVID-19 pandemic. Such a program will help the country regain confidence, attain higher economic growth, and restore employment rates to pre-crisis levels,” it said.
“The DBCC thus expects the country to recover by fiscal year 2021 with GDP growth of 7.1 to 8.1 percent,” it said.