Longer, larger COVID-19 impact to dim PH economic prospects – IMF

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(FILE PHOTO)

Metro Manila (CNN Philippines, June 25) – The International Monetary Fund joined other development finance institutions in projecting a deeper economic contraction this year of up to 3.6 percent for the Philippines due to the pandemic.

The IMF released its World Economic Outlook Update report Wednesday night, which reversed the 0.6 percent growth forecast for the local economy back in April as the coronavirus crisis raged.

"The downward revision to growth forecasts is mostly attributable to larger-than-expected supply disruptions related to COVID-19 and weaker demand in major trading partners," IMF country representative Yongzheng Yang said in an e-mail.

This would spell an abrupt turn from the 6 percent growth tallied in 2019, and the 6.3 percent estimate issued by the multilateral lender prior to the global health crisis.

"We now expect the resolution of COVID-19 to be more gradual, and hence the impact of the pandemic on the economy to be larger and longer than previously anticipated," Yang added.

The Asian Development Bank expects the economy to shrink by 3.8 percent, while the World Bank was less pessimistic with a 1.9 percent contraction.

These estimates compare to the government's projection of a 2 percent contraction as the best case scenario and -3.4 percent being the worst, before shooting up to a 7.1-8.1 percent growth forecast by 2021.

If realized, this would end a two-decade growth streak. The last contraction was recorded in 1998 due to the impact of the Asian Financial Crisis.

The Washington-based IMF said the pandemic had a more negative impact during the first six months of the year than they expected, with recovery seen slow.

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"Where lockdowns are required, economic policy should continue to cushion household income losses with sizable, well-targeted measures as well as provide support to firms suffering the consequences of mandated restrictions on activity," the report read, noting that reopening economies should focus on stimulating demand and providing "targeted support" to sectors.

The Philippine government's economic team is pushing for an ₱846-billion economic recovery plan, against a ₱1.3 trillion stimulus package being pushed in Congress.

Of 30 economies featured by the IMF in its report, only China and Egypt will grow -- by 1 percent and 2 percent, respectively. Bigger nations like Italy and Spain will contract the most by 12.8 percent, which are also among the hardest hit by the virus, the IMF projected.

Global output, the IMF further said, will shrink by 4.9 percent this 2020, before mustering a 5.4 percent rebound next year. The United States economy will shrink by 8 percent, the United Kingdom by 10.2 percent, and Japan by 5.8 percent, to name a few, it said.