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Business

COVID-19 remains major threat to growth

Mary Grace Padin - The Philippine Star
COVID-19 remains major threat to growth
The COVID-19 pandemic may continue to affect the country’s growth prospects in the second semester, according to the Development Budget Coordinating Committee (DBCC).
Edd Gumban

MANILA, Philippines — The COVID-19 pandemic may continue to affect the country’s growth prospects in the second semester, according to the Development Budget Coordinating Committee (DBCC).

In a report, the inter-agency DBCC said the ongoing health crisis has negatively impacted the government’s macro-fiscal performance in the first semester, and may likely continue to do so “for the rest of the year and beyond.”

“The COVID-19 crisis brought about heightened uncertainty and subdued consumer and business sentiment. It also caused disruptions in value chains, transportation, logistics, and the labor market. These issues can probably linger and have a negative impact over the medium-term,” the DBCC said.

The DBCC also flagged the possible occurrence of typhoons and a weak La Niña phenomenon as risks to the country’s recovery this year.

“External risks, likewise, remain, such as weakened global economy, the slowdown in trade, and geopolitical tensions between key economies. Remittances and foreign direct investments (FDI) may also be negatively affected,” the committee said.

According to the DBCC, the challenge to the government for the rest of the year is to accelerate public spending and to pass key reforms to address the impact of the pandemic.

“It is also crucial that the measures under the Bayanihan 2 (Bayanihan to Recover as One Act), which are expected to drive government spending further for the remainder of the year, be implemented aggressively and effectively the soonest time possible,” it said.

Nevertheless, the DBCC said sound macroeconomic fundamentals and landmark reforms over the previous years provided the country headroom to mitigate the effects of the pandemic.

Moreover, economic managers said the government is employing several short-term strategies in response to the pandemic.

They also emphasized the importance of continuing the Build Build Build program due to its multiplier effect as this creates jobs, drives consumption, and stimulates economic activity.

“Despite the bleak outlook for 2020, the government is expecting a rebound over the medium-term given the fiscal stimulus and other recovery measures being implemented. The availability of a safe and effective vaccine against COVID-19 will also play a crucial role in the country’s recovery,” the DBCC said.

The committee expects growth to revert to a positive trajectory starting 2021 as economic activities fully resume and consumer and business confidence improve.

It also said that the Bayanihan 2   would sustain the efforts made by the government in response to the COVID-19 pandemic and signal the country’s transition into the recovery stage.

“While it is expected that recovery will be gradual and lengthy, the national government remains hopeful that the Philippine economy will not just be more resilient, but also be back on track to achieving an upper-middle-income status in the coming years,” the committee said.

Based on the latest projections of the DBCC, the country’s gross domestic product is expected to contract by 5.5 percent this year.

Still, economic managers are confident that the economy would be able to rebound in the coming years, with the GDP seen growing by 6.5 percent to 7.5 percent in 2021 and 2022.

DBCC

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