Metro Manila (CNN Philippines, April 3) — Economic growth would see a sharp slowdown this year as the global COVID-19 pandemic cripples business and consumer spending, a report released Friday by the Asian Development Bank said.
In its “Asian Development Outlook 2020” annual report, the regional development finance lender slashed its growth forecast for the Philippines to just 2 percent, a sharp deceleration from last year’s 5.9 percent. This assumes that the outbreak will be contained by June.
The rest of the region is forseen to suffer, a result of the novel coronavirus — which ADB dubbed as the “worst pandemic in a century” — halting business operations, tourism profits, and household spending. Some economies would actually enter a recession, with production sinking from 2019 levels.
“All of developing Asia’s subregions will see growth weaken this year because of weak global demand, and in some economies because of domestic outbreaks and containment policies,” the ADB said in the report.
“Subregions that are more economically open like East and Southeast Asia, or tourism-dependent like the Pacific, will be hard hit,” it added, noting that countries with substantial trade ties with China would certainly get hurt.
The entire Luzon, including the country’s main economic hub Metro Manila, has been placed under a month-long lockdown in a bid to contain the spread of the disease. ADB said the enhanced community quarantine, which has been followed by other provinces and cities, would “weigh heavily on domestic demand.”
All flights, as well as land and sea travel, have been restricted since March 17. Flights from China and South Korea — the country’s biggest tourist markets — as well as Hong Kong and Macau had been cut off weeks earlier due to rising COVID-19 cases there.
The ADB forecast is weaker than the World Bank’s 3 percent estimate. However, it sits at the midpoint of the National Economic and Development Authority’s projection that the local economy could either contract by 0.6 percent or expand by a maximum of 4.3 percent.
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The global health crisis would drag down all Asian economies, with the outbreak also seen as the biggest risk this year, the ADB report said. On this end, the lender said tourism, global trade, and even remittances from overseas Filipinos — major sources of funds by families in the country — would also be deflated.
“No one can say how widely the COVID-19 pandemic may spread, and containment may take longer than currently projected. The possibility of severe financial turmoil and financial crises cannot be discounted,” it added.
Over 1 million people have been infected by the virus worldwide, which has caused more than 52,000 deaths. Meanwhile, about 210,000 patients have recovered.
China, which reported the first case of the disease, would see growth slump to just 2.3 percent from 6.1 percent in 2019, while regional growth would struggle forward by 2.2 percent, starkly softer than last year’s 5.7 percent, ADB said.
ADB said the pandemic would likely cost the global economy anywhere between $2 trillion and $4.1 trillion, especially as huge economies like Europe and the United States take a hit.
This year’s slump would be followed by a 6.5 percent growth surge by 2021, with the ADB seeing the Philippine government’s spending spree to help patients and workers recover triggering a strong rebound.
”Public investment and a rebound in private consumption will be the main drivers of the economic recovery,” it said, noting that the sustained construction of state infrastructure projects could buoy growth. ADB economists added that the Philippine government has enough space to spend more to hasten the growth rebound.
However, the institution clarified that their latest forecasts assume that COVID-19 wll be contained within the year, which will allow economies to return to normal by 2021.
“The impact on the economy will be larger than currently assumed if the global outbreak is prolonged beyond the first half, or if there is a sustained local transmission in the Philippines,” it added.
“Outcomes can be worse than forecast and growth may not recover as quickly,” ADB cautioned.
READ: BSP governor expects PH to go into technical recession due to COVID-19
Amid all this, the ADB noted that innovative solutions to issues can also help revive economic activity, saying that sound education systems, innovative entrepreneurship, conducive institutions, deeper capital markets, and dynamic cities could be game-changers.
