Expectations on the Philippine Economy in this Pandemic-Stricken Year
By Ed Kieran Reyes
The World Bank has reported that the Coronavirus Pandemic caused the global economy to plunge into a deep recession, far worse than those that have occurred in history. They forecast that the global Gross Domestic Product (GDP) would contract by an alarming 5.2 percent this 2020.
The GDP measures a country’s total monetary value of all final goods and services in a specific period of time (usually in a quarter or full-year), which makes it a reliable reference in determining a country’s economic health through the GDP growth rate, or simply, how fast the economy is growing. When the GDP growth rate is positive, it means that the economy has grown. Otherwise, the economy has contracted, or what economists term as a “recession”.
The World Bank’s forecast means that the combined GDP of all countries in the entire world would shrink by 5.2 percent. When a recession occurs, businesses close and people lose their jobs. As a result, people, particularly the vulnerable ones, plunge into poverty.
Philippine Economy in 2020
As with the rest of the World, the economy of the Philippines is also expected to contract this 2020 due to the pandemic. Both the national government and economic experts from the International Monetary Fund (IMF) expect the contraction of the Philippine economy but at different magnitudes.
Forecast of the National Government
In its statement in May 2020, the Development Budget Coordination Committee (DBCC), which is composed of economic managers of the current administration, projects that the country’s GDP would contract by 2.0 to 3.4 percent in 2020. This is equivalent to about PhP2.0 trillion or about 9.4 percent of GDP for this year.
However, they expect that with the “timely implementation of a well-targeted recovery program, alongside efforts of the private sector”, the country could mitigate the impact of the COVID-19 pandemic and restore the country’s economy to pre-pandemic levels. The DBCC also expects the country’s economic growth to be at 7.1 to 8.1 percent of GDP in 2021.
Forecast of the International Monetary Fund (IMF)
On the other hand, in its June 2020 World Economic Outlook Update, the International Monetary Fund (IMF) projects the country’s GDP would shrink by 3.6 percent in 2020. This is a downgrade from their April 2020 report which forecasted that the Philippines would still grow but only at 0.65 percent.
Rise in COVID-19 Cases Vis-à-vis Easing of Quarantine Measures
Currently, the Department of Health of the Philippines’ daily update on the number of people in the country positive to COVID-19 indicates that the number of active cases continue to rise, especially after the easing of lockdowns. Most of these cases have been recorded in Metro Manila, prompting questions as to whether to revert the metro into strict quarantine measures. Doing so will, however, cause further damage to the country’s economy. As a result, policymakers face a tradeoff between stricter quarantine measures and the country’s economic health.
Dark Clouds Ahead
There is no doubt that the Philippine economy would suffer from the Pandemic. It is only a matter of time until people get to experience the harsh effects of an economic recession. To mitigate such adverse impacts, both the national government and the private sector should work together on measures to beat the pandemic and deliver relief to the neediest, without losing sight of how the economy could recover.