By Beting Laygo Dolor, Contributing Editor
The Asian Development Bank (ADB) expects the Philippines to post the worst economic performance among Southeast Asian nations in 2020.
In its latest outlook, released to local media last week, the ADB again reduced its growth forecast for the Philippines in light of continued sluggish household consumption as well as weak investments.
The ADB now expects the country’s gross domestic product (GDP) to shrink by 8.5 percent as against 7.3 percent projected in September.
On the plus side, the Philippine economy is expected to recover next year, with growth expected at 6.5 percent but based on the assumption that “public investment picks up and the global economy recovers.”
The country’s projected recovery next year will be the second fastest in the region, behind Malaysia’s expected seven percent growth.
Based on its Asian Development Outlook Supplement report, the revised forecast falls under the lower end of the 8.5 percent to 9.5 percent shrinkage projected by the Duterte administration’s economic team.
According to the ADB, “The GDP forecast for 2020 is downgraded to 8.5 percent contraction because household consumption and investment have fallen more than expected.”
Among Southeast Asian nations, the country’s drastic GDP fall will be behind Thailand’s 7.8 percent drop, Singapore’s 6.2 percent fall, Malaysia’s 6 percent shrinkage, and Indonesia’s 2.2 percent retreat.
Only Vietnam is seen to grow this year at 2.3 percent GDP, an upgrade from the original projection of 1.8 percent growth.
Indonesia and Malaysia also saw their outlooks downgraded from -2.2 percent to -1 percent and from -6 percent to -5 percent, respectively.
According to the ADB report, “the Philippine economy contracted by 10 percent in January-September 2020, reflecting muted consumer and business activity and confidence under the pandemic.”
Despite imposing what is generally considered as among the world’s toughest lockdown and quarantine rules, the Philippines still had the second highest total of Covid-19 cases in the region. Indonesia recorded the highest number in recent months.
As of December 12, the country had recorded a total of 448,331 coronavirus cases, with 409,433 recoveries and 8,730 fatalities.
For a group of 45 nations in the Asian Pacific region referred to as Developing Asia, combined shrinkage for the year is seen at 0.4 percent, according to the ADB. And while “prospects diverge within the region,” the Bank said it expects growth in the group to rebound to 6.8 percent in 2021.
Said ADB chief economist Yasuyuki Sawada, “A prolonged pandemic remains the primary risk, but recent developments in the vaccine front are tempering this. Safe, effective, and timely vaccine delivery in developing economies will be critical to support the reopening of economies and the recovery of growth in the region.”
Also noted as a potential risk to the region’s growth outlook was the worsening tension between China and the US over trade and technology issues. It is not clear if the incoming Biden presidency will result in any improvement on the strained relations between the two economic superpowers.
The ADB lowered its 2020 GDP forecast for Southeast Asia to -4.4 percent, from the previous -3.8 percent. Growth outlook for next year was likewise reduced to 5.2 percent from the previously projected 5.5 percent.
For this year, the ADB also slightly raised its inflation forecast for the Philippines to 2.5 percent from the original 2.4 percent it stated in September.
The inflation outlook for 2021 remained at 2.6 percent.