WB: Philippines recovery to trail rest of the world

MANILA, Philippines — The Philippines may not be able to get out of the pandemic-induced slump until the health crisis has passed over most of the world, the World Bank said yesterday.

In a presentation during the BusinessWorld Virtual Economic Forum yesterday, World Bank country director for the Philippines Ndiame Diop said the unique impact of the COVID-19 pandemic and the economic scaring it caused on the domestic economy would make it more likely that a complete rebound would not be sooner than that of the rest of the world.

He noted that the pandemic that has been raging for almost a year now is so far the most recessionary of all global crises that occurred in the past 50 years.

Lockdowns worldwide have shocked domestic and external demand, and disrupted the supply of goods and services.

Mobility restrictions caused millions of people worldwide to lose jobs or sources of incomes.

Hardest hit were economically insecure segments of society such as the poor and the aspiring middle class.

The Philippines, despite its good macroeconomic position prior to the pandemic, was not spared from the fallout as seen in the record contraction of 16.9 percent in the second quarter and the still steep decline of 11.5 percent in the third quarter.

Employment was severely hit and a steep rise in poverty incidence is expected for this year, threatening to wipe away years of gains.

Diop noted that despite the growing ranks of middle class in the country for the past 10 years, millions of Filipinos have not yet reached the economic security of the middle class and remain in danger of falling into poverty amid the crisis.

“That such a strong economy like the Philippines before the pandemic suffers so much is the best illustration of the unique scale of the pandemic,” said Diop.

“The Philippines will remain well-placed to bounce back. But again, it will not be over for the Philippines until it is over for the rest of the world,” he said.

The country remains under the world’s longest continuous lockdown, causing the economy to operate at limited capacity.

World Bank expects the economy to  contract by 6.9 percent this year, equivalent to P6.3 trillion of the gross domestic product (GDP), because of the pandemic.

While the curve of infection appears to finally be flattening, the number of cases remains elevated at more than 400,000, necessitating the need for strict social distancing and limitations in the reopening of economic activities.

“In the Philippines we also expect a strong GDP rebound. But even if the GDP numbers bounce back strongly in 2021, it does not mean we have fully recovered. Recovery from this pandemic will be material when people get their jobs and income back,” said Diop.

With the still high level of infection, restoring business and consumer confidence is also now heavily reliant on the availability of a successful vaccine.

As such, any delay in the development and distribution would also mean a delay in the restoration of confidence.

“Delay in the development and rollout of vaccines may also delay rebound in confidence. But the government has so far developed a sensible vaccine strategy,” said Diop.

“The government will now have to sustain the public health standards, prevent surges in cases in prepare for the deployment of the vaccine.”

In its October 2020 Economic Update for East Asia and the Pacific, the World Bank said the Philippine economy would likely contract by 6.9 percent in 2020, before rebounding to a 5.3 percent growth in 2021 and 5.6 percent in 2022.