MANILA, Philippines — The COVID-19 pandemic will take its toll on economies across East Asia and the Pacific, and the Philippines was no exception given its reliance on tourism and trade, the World Bank said in a report Tuesday.

The Washington-based lender’s report titled “East Asia and Pacific in the Time of COVID-19” showed a 2020 gross domestic product (GDP) growth forecast for the Philippines of 3 percent at “baseline”—defined by the World Bank as “a scenario of severe growth slowdown followed by a strong recovery.”

At a “lower-case” scenario of “a deeper contraction followed by a slugging recovery,” the World Bank expects the Philippine economy to contract by 0.5 percent this year.

The World Bank’s latest forecasts for the region took into account developments as of March 27.

“Developing economies in East Asia and the Pacific, recovering from trade tensions and struggling with a viral disease, now face the prospect of a global financial shock and recession. The region’s relative resilience, demonstrated during the 2009 crisis, is being tested again,” the World Bank said.

The lender noted that “the biggest immediate economic costs of COVID-19 are primarily due to the preventive behavior of individuals and the transmission control policies of governments.”

“These actions first hit the Chinese economy, by disrupting supply and freezing demand, and other partner economies by limiting flows of trade and tourists. As the virus spreads beyond China, citizens and governments of many other countries are reacting by taking similar action, which is hitting demand and supply in these countries in turn. That is amplifying the mutual shocks through not just flows of trade and tourists, but also finance. The East Asia and Pacific region’s reliance on these flows magnifies its exposure to the shocks,” it added.

Across the East Asia and Pacific region, World Bank projections showed economic growth this year would slow by an average of 1.3 percent in the baseline or contract by 2.8 percent in the lower-case scenario.

“Containment of the pandemic would allow recovery, but the risk of durable financial stress is high even beyond 2020. Most vulnerable are countries that rely heavily on trade, tourism, and commodities; that are heavily indebted; and that rely on volatile financial flows,” according to the World Bank.

But the World Bank warned that more than its negative impact on economies, the pandemic would hurt the poor the most.

“The COVID-19 shock will also have a serious impact on poverty, both directly through illness and indirectly through lost incomes. Under the baseline growth scenario, nearly 24 million fewer people are estimated to escape poverty across developing East Asia and the Pacific in 2020 than would have in the absence of the pandemic. Under the lower-case scenario, poverty is estimated to increase by about 11 million people. Households linked to affected sectors will suffer disproportionately,” the World Bank said.

To mitigate COVID-19’s effect, the World Bank recommended six policy measures: countries must balance both health and macroeconomic policies; health capacity should be urgently augmented to prevent potentially overwhelming demand; fiscal and monetary policies must be recast in a COVID-19 mold; the financial sector should help households to smooth consumption through easier access to credit and firms to survive the disruption through easier access to liquidity; open trade must stay, and international organizations should help expand the supply of key medical products by facilitating public-private partnership (PPP).

“In each of these areas, containment, health, macroeconomic policy, finance, trade, and aid, there are self-evident gains from internationally coordinated action that takes an integrated view of policy. But some nations are resorting to unilateral measures and succumbing to scarcity nationalism. All countries in the East Asia and Pacific region and beyond must recognize that, in addition to bold national actions, deeper international cooperation is the most effective vaccine against this virulent threat,” the lender said.

/MUF


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