The Asian Development Bank (ADB) on Thursday further lowered its growth projection for the Philippine economy this year as the country continues to struggle with containing the coronavirus disease 2019 (Covid-19) pandemic, hampering recovery.
In its Asian Development Outlook 2020 Update supplement, the Manila-based multilateral lender said it downgraded its Philippine gross domestic product (GDP) forecast for 2020 to -8.5 percent from the previous -7.3 percent, as “household consumption and investment have fallen more than expected.”
The latest outlook is a reversal of 2019’s 6.0-percent GDP growth, but falls at the lower end of the government’s current -8.5 to -9.5 percent growth estimate.
It is worse than the World Bank’s -8.1 percent, the International Monetary Fund’s -8.3 percent and Moody’s Investors Service’s -7 percent, but it is better than Fitch Ratings’ -9.6 percent and S&P Global Ratings’ -9.5 percent.
These revised projections came after the Philippines remained in recession after domestic output slid by 11.5 in the third quarter, 16.9 percent in the second and 0.7 percent in the first. This brought the contraction in GDP to 10 percent in the first nine months.
That the “Philippine economy contracted by 10 percent in January to September 2020 [showed] muted consumer and business activity and confidence [amid] the pandemic,” the ADB said.
Household consumption declined by 9.3 percent in the third quarter, while fixed investments fell by 37.1 percent.
Despite its lowered projection, the ADB expects the economy to recover in 2021 and grow by 6.5 percent, assuming that public investments pick up and the global economy recovers.
For Southeast Asia, the ADB also trimmed its GDP forecast to -4.4 percent in 2020 from the previous -3.8 percent, noting that it “remains under pressure as Covid-19 outbreaks and containment measures continue, particularly in Indonesia, Malaysia, and the Philippines.”
It also raised its Philippine headline inflation forecast to 2.5 percent this year from the earlier 2.4 percent, and expects it to pick up to 2.6 percent in 2021.
Consumer price growth accelerated to a 20-month high of 3.3 percent in November on account of higher prices of food and non-alcoholic drinks.
The figure was faster than October’s 2.5 percent and 1.3 percent from a year ago. Year-to-date, it averaged 2.6 percent, falling within the Bangko Sentral ng Pilipinas’ 2- to 4-percent target range for 2020.
The annual flagship economic publication of the ADB, the Asian Development Outlook is published every April. Its updates are published in September and brief supplements in July and December.
WITH A REPORT FROM MAYVELIN U. CARABALLO