If the Philippines can contain its local COVID-19 outbreak by midyear, the economy will still grow by a slower 2 percent in 2020, the Asian Development Bank (ADB) said Friday.
But the Manila-based multilateral lender warned that economic recovery might lag if its engines—the supply chain, businesses and their workforce—could not be jumpstarted as soon as possible.
“Risks are tilted to the downside. The main downside risk to GDP (gross domestic product) growth in 2020 comes from COVID-19 and is therefore highly unpredictable. The impact on the economy will be larger than currently assumed if the global outbreak is prolonged beyond the first half, or if there is a sustained local transmission in the Philippines,” the ADB said in its Asian Development Outlook 2020 report.
In a special chapter that discussed the impact of the COVID-19 pandemic on Asia-Pacific economies so far, ADB projections showed that the Philippines might shed more than 4 percent of GDP from a domestic COVID-19 outbreak, on top of a smaller 2 percent of GDP impact coming from global spillovers.
According to the ADB, “a less-desirable U-shape recovery is possible if disrupted supply chains are not restored quickly, workers are not rehired immediately or business are slow to restart operations” in the Philippines.
Luzon—which accounted for more than 70 percent of national GDP—and other parts of the country are already on the third week of a monthlong enhanced community quarantine, but officials have yet to decide if the massive lockdown until mid-April should be extended or not, even as many in the business sector preferred a less restrictive and localized containment of the COVID-19 disease.
The ADB said the ongoing quarantine would “weigh heavily on domestic demand.”
The negative impact on consumption would also be “compounded by the impact of the outbreak in other countries on tourism, trade and remittances,” the ADB said.
In the case of tourist arrivals, preliminary government data cited by the ADB showed a 41.4-percent year-on-year drop in February—reversing the 9.8-percent increase last January—as the lender noted that the early COVID-19 hotspots China and South Korea made up 45 percent of inbound foreign visitors.
Also, the ADB said “second-round effects that emerged as global supply chains were disrupted have affected manufacturing and merchandise exports.”
“Remittances from overseas Filipino workers, equivalent to 9 percent of GDP, will also slow. Large flows of remittances come from the US, Europe and the Middle East, which collectively supply 70 percent of all remittances”—regions also currently grappling with the pandemic, the ADB added.
Financial markets such as the stock market also experienced a slump while the peso slightly depreciated.
“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. 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,” ADB country director for the Philippines Kelly Bird said in a statement.
“The ADB has been working closely with the Philippine government in its fight to ease the impact of the COVID-19 pandemic on Filipinos. We have provided two grants totaling $8 million to assist the government and we are 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,” Bird added.
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