The coronavirus 2019 (Covid-19) pandemic will cause the Philippine economy to shrink by 1.9 percent this year, according to the World Bank.
Based on the Global Economic Prospects (GEP) report, the World Bank said, however, that Philippine GDP growth will rebound to 6.2 percent in 2021.
The Philippines, Malaysia, and Thailand are expected to post the largest contractions in the East Asia and the Pacific region this year. Malaysia’s economy is expected to shrink 3.1 percent and Thailand, 5 percent.
“The pandemic will likely further slow potential growth in the region by weakening investment and the supply chains that have been an important conduit for productivity gains over the last decade,” it added.
Among the major economies in the region, the forecast of the World Bank on Philippine GDP growth had the largest revision.
The Washington-based lender cut the country’s GDP growth projection by 8 percentage points compared to its January forecast.
This was followed by Thailand with 7.7 percentage points and Malaysia at 7.6 percentage points compared to the forecast made in January.
“This reflects the significant impact of domestic lockdown measures, as well as the impact from reduced tourism, disruption of trade and manufacturing sector, the spillovers from financial markets, and lower commodity prices in Malaysia,” the report stated.
Growth in the East Asia and the Pacific excluding China is projected to contract by 1.2 percent in 2020, marking the first contraction since the 1998 Asian financial crisis.
However, growth is expected to rebound to 5.4 percent in 2021 as the effects of the virus dissipate.
Deep recession
The World Bank said the current economic crisis is the “deepest global recession since World War II” with global GDP expected to contract 6.2 percent.
This is the deepest global recession since 1945 to 1946. It is also considered more than twice as deep as the global financial crisis in 2009.
“The COVID-19 recession is singular in many respects and is likely to be the deepest one in advanced economies since the Second World War and the first output contraction in emerging and developing economies in at least the past six decades,” World Bank Prospects Group Director Ayhan Kose said in a statement.
“The current episode has already seen by far the fastest and steepest downgrades in global growth forecasts on record.If the past is any guide, there may be further growth downgrades in store, implying that policymakers may need to be ready to employ additional measures to support activity,” Kose added.
The World Bank said the global economy experienced 14 global recessions since 1870. Recession years were 1876, 1885, 1893, 1908, 1914, 1917-1921, 1930-1932, 1945-1946, 1975, 1982, 1991, 2009, and 2020.
The report stated that this year will also see the highest share of economies experiencing contractions in annual per capita since 1870.
The World Bank said the share of economies in recession will be more than 90 percent, higher than the 85 percent of countries in recession at the height of the Great Depression of 1930 to 1932.
“This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges,” World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu said in a statement.
“Our first order of business is to address the global health and economic emergency. Beyond that, the global community must unite to find ways to rebuild as robust a recovery as possible to prevent more people from falling into poverty and unemployment,” Pazarbasioglu added.
Moving forward
The World Bank said there is an urgent need for health and economic policy action, including global cooperation, to cushion its consequences, protect vulnerable populations, and strengthen countries’ capacities to prevent and deal with similar events in the future.
Emerging market and developing economies, the World Bank said, should exert effort to strengthen public health systems as well as address challenges posed by informality and limited safety nets.
If they have fiscal space, the World Bank said they should consider rolling out additional stimulus, especially if the effects of the pandemic persist. This should be accompanied by efforts to “strengthen fiscal frameworks, increase domestic revenue mobilization and spending efficiency, and raise fiscal and debt transparency.”
The World Bank also said the transparency of all government financial commitments, debt-like instruments and investments is a key step in creating an attractive investment climate and could make substantial progress this year.
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