Sustained improvements in managing the pandemic, disaster risk reduction, and a possible rebound in the global economy can help the Philippines recover faster from the impact of the global crisis.
A study done by the World Bank noted that the pandemic and the global recession, coupled with the series of natural disasters that hit the country in recent months, will “likely shrink” the Philippine economy by 8.1 percent.
The World Bank’s Philippines Economic Update, which was released on December 8, is a revision of its forecast released in October.
“The series of natural disasters that hit the country while we are battling the pandemic highlights the importance of mainstreaming disaster risk reduction and climate change adaptation into policy and planning,” said Ndiame Diop, World Bank country director.
“While the Philippines is financially resilient, stronger coordination, execution and implementation will help further improve social and physical resilience to frequent shocks,” he added.
A series of typhoons in November have brought devastation to a large swath of the northern Philippines, further darkening this year’s economic growth outlook.
Prior to the disasters, however, the Philippine economy had already posted a 10 percent contraction in the first three quarters, the worst since the 1985 debt crisis.
Private consumption, which accounts for two-thirds of the Philippine economy has declined at a record pace because of high unemployment and falling incomes during the pandemic.
The World Bank update noted that the pandemic and the natural disasters threaten to reverse the trend of a steady decline in poverty in recent years.
The results of a pandemic impact monitoring survey conducted in August 2020, showed that about 40 percent of households reported a fall in income.
Entrepreneurial income also reportedly declined, particularly among households engaged in non-farm business.
Remittances from abroad, a lifeline for many Filipino families, were reported to have fallen for two in five households that receive remittances, according to the survey.
As a result, poverty is estimated to increase from 20.5 percent in 2019 to 22.6 percent in 2020 (measured against the World Bank lower middle-income poverty line of US$3.2/day).
The World Bank update expected the Philippines to recover in the next two years, assuming continuing improvements in bringing down the transmission of COVID-19.
In recent weeks, the government has gradually allowed more industries to resume operations, reviving jobs and incomes and boosting private consumption.
The World Bank study said this will help the economy bounce to a 5.9 percent growth in 2021 and 6.0 percent in 2022.
Rong Qian, World Bank senior economist, said the country “needs to sustain focus on the structural reform agenda” to hasten recovery.
“Speeding up reforms that improve the business environment, foster competition, and strengthen resilience against natural disasters will support the economic recovery and boost productivity growth in the long term,” he said.
The World Bank’s current forecasts hinge on China’s early recovery, alongside the expected rebound in the global economy in 2021, which will allow for export growth to recover, and larger remittance inflows to stimulate domestic demand.
The Philippine government is also expected to ramp up its infrastructure spending starting in the fourth quarter of 2020, creating jobs in the construction sector.
Pre-election activities in the run-up to the national elections in 2022 will give an additional boost to demand as early as in the second half of 2021.