By Lee C. Chipongian
The International Monetary Fund (IMF) has reduced its Philippine growth forecast from 6.3 percent to 0.6 percent for this year as economic activity is severely impacted by the health crisis.
Gross domestic product (GDP) is, however, expected to recoup losses and post a recovery of 7.6 percent in 2021, based on the April 2020 IMF World Economic Outlook (WEO) Report.
In 2019, the local economy grew by 5.9 percent. The Duterte economic team, factoring in the COVID-19 pandemic, has estimated that GDP could still grow by 4.3 percent for this year versus original target of 6.5-7.5 percent. The National Economic Development Authority said the worst impact of the outbreak and resulting prolonged lockdown could mean a recession with GDP falling to a negative 0.6 percent for 2020 but this is if the state did nothing in “softening the blow” of the health crisis.
According to the IMF, the lockdown and containment measures which are necessary will have a “short-term toll on economic activity but should also be seen as an important investment in long-term human and economic health.”
While governments are adopting measures to reduce the coronavirus contagion, the IMF said economic policies will have to be carefully crafted to “cushion the impact of the decline in activity on people, firms, and the financial system; reduce persistent scarring effects from the unavoidable severe slowdown; and ensure that the economic recovery can begin quickly once the pandemic fades.”
Among ASEAN-5 nations, only Vietnam, the Philippines and Indonesia are seen to report positive growth of 2.7 percent, 0.6 percent and 0.5 percent, respectively, for 2020. Malaysia and Thailand are expected to have negative numbers of 1.7 percent for Malaysia and as much as 6.7 percent contraction for Thailand. All five ASEAN members are projected to recover in 2021 with Malaysia as top performer with a projected nine percent GDP growth and Thailand with the most modest growth of 6.1 percent.
The WEO noted governments’ temporary and targeted credit guarantees or even direct loans as assistance for companies, in particular it noted the Philippines’ microfinancing loan package for micro, small, and medium-sized enterprises as liquidity assistance.
The WEO also assessed that emerging and developing Asia which includes China and India, may still manage a real GDP growth of one percent for this year and to bounce back to 8.5 percent in 2021.
The Asia region, with advanced countries such as Japan, Korea, Australia, Singapore, Taiwan, Hongkong, Macao and New Zealand, is projected to have zero real GDP for this year from 4.6 percent in 2019, but will expand by 7.6 percent in 2021.
The WEO world projection is grimmer, forecasting a negative three percent from 2.9 percent in 2019. For 2021, the world economy may recover to 5.8 percent. All advanced economies led by the US, the Euro Area (Germany, France, Italy and Spain), Japan, United Kingdom, Canada and other rich countries are all expected to post negative real GDP numbers for this year.
The emerging market and developing economies which include ASEAN-5 has a projected negative one percent real GDP versus 2019’s 3.7 percent, but will bounce back by 6.6 percent in 2021.
The IMF said emerging market and developing economies that include the Philippines are currently beset by “severe external demand shock, dramatic tightening in global financial conditions, and a plunge in commodity prices, which will have a severe impact on economic activity in commodity exporters.”