The Asian Development Bank expects Philippine economic growth to slow down significantly this year to 2 percent from the actual expansion of 5.9 percent in 2019, pulled down by the impact of coronavirus disease 2019.
It said in its Asian Development Outlook 2020 report the economy was expected to rebound strongly by 6.5 percent next year, with expansionary fiscal and monetary policies partly offsetting slower domestic demand and disruptions in tourism, trade and manufacturing.
The government implemented a month-long enhanced community quarantine in Luzon that would last until April 12 to stop the spread of Covid-19.
ADB said a strong recovery of 6.5-percent growth would be possible in 2021, assuming the virus infections in the country would be curbed by June this year.
“This unprecedented and extraordinary public health emergency brought about by the COVID-19 pandemic will substantially slow down economic growth this year, with most of the contraction in the economy occurring in the second quarter,” ADB country director for the Philippines Kelly Bird said.
“We are anticipating a bounce back starting in the second half of this year, supported by the government’s stimulus spending and easier monetary policies,” said Bird.
Bird said ADB was working closely with the Philippine government in its fight to ease the impact of the COVID-19 pandemic on Filipinos. Bird said ADB provided two grants totaling $8 million to assist the government and was now in advanced stages of preparing a larger and comprehensive assistance to help alleviate the impacts of the pandemic on communities’ well-being and support fiscal stimulus.
The ADB on March 14 approved a $3-million grant to help the government deliver emergency medical supplies and equipment, including a new laboratory to enhance the country’s capacity to conduct more COVID-19 tests.
ADB also launched this week a $5-million project to provide critical food supplies for poor families in Metro Manila.
The quarantine measures shut down schools and most government offices and private establishments in Metro Manila and the entire Luzon island, which accounts for over half of the country’s total population and generates more than two-thirds of the country’s overall GDP.
Sustained public investment—especially in priority projects under the government’s “Build, Build, Build” infrastructure development program—and a rebound in private consumption will drive economic growth in 2021, the report says.
The economy will also benefit from the government’s large-scale fiscal spending to boost the delivery of relief measures to vulnerable sectors affected by the pandemic, it said.
The bank expects inflation to reach 2.2 percent this year and 2.4 percent in 2021, with further downside pressure from lower global oil prices. It said with inflation projected to remain within the central bank’s target range of 2 percent to 4 percent, “authorities have room for further monetary policy expansion to cushion any lingering effects of the pandemic on the economy.”
“In addition to combating the COVID-19 pandemic, the Philippines is taking steps to address climate change. The government’s infrastructure development program focuses on improving mass urban transit systems to help shrink the country’s carbon footprint,” it said.