The novel coronavirus or COVID-19 outbreak is most probably sending the Philippines economy into the first annual contraction in more than two decades in the ongoing year before the nation pulls back to recover in 2021, the governor of the central bank stated on Saturday.
The important cities of the Philippines which were among the fastest-growing economies before the pandemic in Asia are currently under strict quarantine steps taken by the government since mid-March.
Philippines gross domestic product would likely shrink by 0.2 percent in 2020 before bouncing back to about 7.7 percent as policy support measures gain traction, central bank Governor Benjamin Diokno said in a statement. That would mark a sharp reversal from the government's initial annual growth target of between 6.5 percent and 7.5 percent for 2020 to 2022.
Philippines economy to suffer a contraction
The economic recovery would follow a U-shaped path in 2021, following a slowdown in the first quarter and contractions in the next two quarters of this year, Diokno said. "The strong recovery is based on the assumption that the pandemic is contained in the second half of 2020." Philippines President Rodrigo Duterte on Friday extended a strict lockdown in the capital Manila and key cities until May 15 to try to contain the spread of the coronavirus, which has so far killed 477 people and infected 7,192 in the country.
Given the collapse of world crude prices, and the coronavirus' impact on global and domestic growth prospects, inflation would average two percent this year, down from the previous 2.2 percent forecast, the central bank said. Inflation is then expected to accelerate to an average of 2.45 percent for 2021, slightly up from the previous forecast of 2.4 percent, as domestic activity picks up and more cash flows through the economy, it added.
(With agency inputs)