World Bank upgrades Philippine outlook, but 'scarring' a big problem

MANILA, Philippines — The World Bank on Tuesday upgraded its growth projection for the Philippines this year, but warned that effects of pandemic-induced economic scarring would mean the road to recovery would be rocky. 

In a new report sent to journalists, the Washington-based lender raised its growth forecast for this year for the Philippines to 5.3% from 4.3% previously owing to a “surprise” expansion back in the third quarter, when restriction were retightened following the onslaught of the Delta variant.

“We see second surge of pandemic due to the Delta variant which had been more adverse due to the bigger number of cases but then initially we would have thought this would impact growth even further,” Kevin Chua, senior World Bank economist in Manila, told a press conference.

“But what happened was that mobility wasn’t really hampered in the Q3 of 2021, so this has affected our growth forecast,” Chua added. “We revised upward because of this growth surprise.”

But economic scarring worried the lender nonetheless. For most of the pandemic, the domestic economy was a laggard among its Southeast Asian peers that many analysts forecast the effects of economic scarring to linger in the coming years. 

For the World Bank, this will impact the country’s potential growth. The problem emanates from the closure of 10% of firms across the country within the crisis, which starved potential employment for Filipinos in the short- and long-term. 

Unemployment currently stood at 7.1% or 3.50 million people as of October according to national statisticians. 

Compounding this scarring were problems worsened by the pandemic: health insecurities especially among the country’s poor and the disruption of the country’s education system. The World Bank noted the latter would potentially hamper the formation of human capital accumulation, which is crucial for growing economic productivity. 

Economic scarring will worsen as Filipinos left the country during the pandemic due to a host of factors, which the World Bank noted “created additional pressure on the domestic job market through the disruptions on international labor migration.” Chua said this will dent human capital accumulation, referring to the quality of labor and professionals that the country could develop and produce within a time period. 

The impact on the labor market will be wide-reaching, as the World Bank took note of the quality of jobs Filipinos turned to during the pandemic. 

“People went to agriculture and services, low-productive services. These are indications that some of the more productive jobs have been lost, that’s why people have returned back to agriculture and low-productivity services,” Chua said. 

Even so, the World Bank expects the final quarter GDP figures of 2021 to be better as the economy reopened. The international financial institution continued to bat for a ‘greater and safe reopening’ of the Philippine economy to create a conducive business environment.

“If we can’t push this, this is one key significant problem that we’ll see for labor market this year,” Chua said.