THE ASEAN+3 Macroeconomic Research Office (AMRO) expects the Philippine economy’s growth to slow to 4.5% in 2020 before rising to beyond 6% next year as it recovers from the fallout of coronavirus disease 2019 (COVID-19).

AMRO’s new 2020 gross domestic product (GDP) growth projection for the Philippines follows the 6.2% estimated in March and 6.4% in January.

AMRO said the economy could surge to 6.7% in 2021, topping its 6.6% estimate for the year issued in March.

The estimates for 2020 and 2021 were the midpoints of ranges of 4-5% and 6.4-7% respectively, depending on various scenarios.

“In the short term, the main risks facing the economy stem from external sources. Notwithstanding the recent easing in the US-China trade tensions, global policy uncertainties remain elevated while business sentiment remains depressed and continues to weigh on investment spending. These uncertainties could exacerbate the current slowdown in the world economy and increase global market volatilities,” according to AMRO’s ASEAN+3 Regional Economic Outlook (AREO 2020).

AMRO also expects government expenditure to be a growth driver this year after demonstrating its capacity to do so in the fourth quarter of 2019, under the ”catch up” spending plan to compensate for the delayed 2019 budget.

The April projections were a supplement to the AREO 2020 report which contains the March projections. The two were released simultaneously on Tuesday.

“The AREO 2020 is based on information available as of March 16, 2020. It was prepared prior to the publication of much of members’ macroeconomic data for February 2020, when the impact of the COVID-19 epidemic was starting to manifest,” it said.

During its virtual conference yesterday, AMRO Chief Economist Hoe Ee Khor’s presentation indicated that the impact on the Philippines could be as much as 4.3 percentage points of GDP under a severe global recession scenario and a 2.5 percentage-point reduction under a milder base-case scenario for the global recession.

AMRO projected that the ASEAN+3 economies, which include the members of the regional bloc plus China, Japan and South Korea, could slow to 0.6-2.7%, lower than the 4.2% projection issued in AREO 2020. This is expected to bounce back to 5.5% next year, against the 5% estimate issued in March.

For the ASEAN countries, AMRO’s April projection is for 1.1% GDP growth this year, ranging between -0.1 and 1.8%. It had estimated growth of 4.4% in AREO 2020. The latest projection for 2021 is 5.2%.

Mr. Khor said the ASEAN+3 will likely post a 4.8% contraction in the first quarter before recovering to growth of 1.2% in the second quarter, 4% in the third quarter and 5.3% in the fourth quarter of 2020.

The quarterly breakdown for the ASEAN countries is 1.9% growth in the first quarter, a 0.6% contraction in the second, and growth of 0.4% and 2.6% in the third and fourth quarters, respectively.

The report said the COVID-19 outbreak has resulted in “significant spillovers” across various countries both in the region and worldwide through slumps in travel and tourism; a decline in Chinese imports; as well as the broader spread of the disease itself.

“In addition, the pervading uncertainty and fear have demolished business and consumer confidence, and increased risk aversion in financial and commodities markets to unprecedented levels,” it said.

Moving forward, Mr. Khor said “the fundamentals in the region are still there, and I think these are strong enough to support growth in the region going forward; growth might not be as strong but certainly, we are much more self-sufficient and we are also very tech-savvy. I’m relatively optimistic that the region will come out of this pandemic relatively fine,” Mr. Khor said.

According to AREO 2020, lower oil prices could mitigate the impact on economies.

Global oil prices continue to drop due to subdued demand with most movements around the world restricted by government-imposed lockdowns and travel bans. — Beatrice M. Laforga