THE PHILIPPINES is seen to post the worst economic performance in Southeast Asia this year, according to the Asian Development Bank (ADB) which slashed its growth forecast anew as household consumption and investments remained sluggish amid the coronavirus pandemic.
In its Asian Development Outlook (ADO) Supplement report released Thursday, the ADB now expects Philippine gross domestic product (GDP) to contract by 8.5% from -7.3% penciled in September. The revised forecast was at the lower end of the 8.5-9.5% slump projected by the Philippine government’s economic team.
“The GDP forecast for 2020 is downgraded to 8.5% contraction because household consumption and investment have fallen more than expected,” the multilateral lender said.
The Philippines will likely see the sharpest annual GDP drop in Southeast Asia, behind Thailand (-7.8%), Singapore (-6.2%), Malaysia (-6%), and Indonesia (-2.2%). Only Vietnam is expected to grow this year with 2.3% GDP, revised upward from the original 1.8% forecast.
Aside from the Philippines, the ADB also downgraded the outlook for Indonesia (-2.2% from -1%, previously) and Malaysia (-6% from -5%), as pandemic containment efforts continued to hamper economic recovery.
“The Philippine economy contracted by 10.0% in January–September 2020, reflecting muted consumer and business activity and confidence under the pandemic,” the ADB noted.
Localized lockdowns or formally referred to as community quarantines are still being imposed across the Philippines, which has the second-highest number of coronavirus infections in Southeast Asia after Indonesia. As of Thursday, the number of coronavirus infections in the country hit 445,540, while the death toll stood at 8,701.
Developing Asia, a group of 45 nations in the Asia-Pacific, will likely shrink by 0.4% this year, less than the 0.7% contraction forecast in September, the ADB said. Growth will rebound to 6.8% in 2021, but the ADB noted “prospects diverge within the region.”
“A prolonged pandemic remains the primary risk, but recent developments on 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,” ADB Chief Economist Yasuyuki Sawada said in a statement.
The worsening tension between the United States and China over trade and technology was also flagged as a risk to the growth outlook for the region.
For Southeast Asia, the ADB also lowered its GDP forecast this year to -4.4% from the previous -3.8% forecast. It also cut Southeast Asia’s growth outlook for 2021 to 5.2% from the previous 5.5%.
The ADB retained its 6.5% growth forecast for the Philippines in 2021, “assuming that public investment picks up and the global economy recovers.”
This is the second-fastest estimated growth among Southeast Asian countries next year, behind Malaysia’s 7%.
Meanwhile, the ADB raised its 2020 inflation forecast for the Philippines to 2.5% from the 2.4% it gave in September, and retained the 2.6% outlook for 2021.
If realized, the estimate for this year will match the average inflation seen last year.
Headline inflation quickened to 3.3% in November from 2.5% in October and 1.3% in the same month last year. This brought the 11-month average to 2.5%, still within the central bank’s 2-4% target.
The ADB raised its inflation outlook for Southeast Asia this year to 1.2% from 1%, previously, but tempered the forecast for next year to 2.2% from 2.3%. Headline inflation averaged at 2.1% for Southeast Asian countries in 2019. — Beatrice M. Laforga