MANILA, Philippines — The Philippine economy is expected to “barely grow at all in 2020 as a whole,” but is expected to rebound strongly in 2021 to register a growth rate of 8.5 percent, said London-based Capital Economics.
In a research brief issued over the weekend titled “Currencies under pressure, virus apreads in S E Asia,” the macroeconomy research firm said that while zero growth in economic output can be expected this year as a result of disruptions to the economy caused by the COVID-19 pandemic, gross domestic product (GDP) growth can be expected to rebound strongly next year to 8.5 percent.
In another brief issued last week, Capital Economics said the domestic economy may be headed towards a sharp contraction in the second quarter of the year as the Luzon-wide community quarantines puts a break on consumption growth.
It projected a slower growth in the first quarter of the year followed by a steep contraction in the second quarter, a less severe contraction in the third, and a strong recovery in the fourth quarter of the year.
This grim outlook is based on the assumption that the outbreak will prevail in the coming months and the country’s main island of Luzon – which produces 70 percent of the country’s GDP – will remain under strict community quarantine and such measures will be extended nationwide.
Other than consumption, the drag on tourism – which makes up 2.5 percent of the country’s GDP – is also set to worsen as many countries close their borders to international visitors.
With slower economic activity this year, headline inflation can be expected to average at 1.7 percent this year, well-below the government’s target, accelerating to an average of four percent in 2021 as demand and economic activity recovers.