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ADB downgrades economic outlook for Philippines

The Asian Development Bank (ADB) has recast its forecast for the Philippine economy to a deeper decline of 7.3 percent this year, citing subdued private consumption and investment amid the coronavirus pandemic.

In its Asian Development Outlook (ADO) 2020 Update released yesterday, the Manila-based multilateral bank downgraded the outlook for the Philippines further from a forecast of a 3.8 percent full-year contraction in June and a slowdown of two percent in April.

However, ADB said the Philippines is expected to rebound next year to return to a growth path of 6.5 percent as the contagion is controlled, the economy opens further, and more government stimulus measures are implemented.

But it said the recovery would be challenged by downside risks such as a slower-than-expected global turnaround, thus weakening trade and investment, as well as remittances by overseas Filipino workers.

ADB’s latest forecast on the performance of the Philippine economy for this year and the next is aligned with the government’s own expectations of a contraction of as much as 6.6 percent this year and a rebound of between 5.5 and 6.5 percent next year.

This assumes that the gradual recovery in activity will continue in step with the reopening of the economy and that community quarantine restrictions would no longer be tightened.

The Philippine economy plunged into a recession in the second quarter of the year, with output contracting by a record 16.5 percent after a severe lockdown paralyzed 75 percent of the economy during the period.

After the downward revision of first quarter economic decline to 0.7 percent, this brought the first half contraction average to around nine percent.

It is widely expected that the contraction would be slower in the third quarter of the year as the economy gradually reopens.

ADB also revised the Philippine inflation forecasts to 2.4 percent in 2020 and 2.6 percent in 2021, compared with previous projections of 2.2 percent and 2.4 percent, respectively, as global oil prices stabilize.

The forecasts are still within the Philippine central bank’s target range of two percent up to four percent.

source: Philstar and Asian Development Bank.

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