THE Philippines could be among the worst-hit ASEAN economies with a projected contraction of 5% in 2020, second only to a projected decline of 6% for Singapore, Oxford Economics said.

It said the Philippines had one of the most stringent lockdowns with an outsized impact on tourism.

The projections were issued in a report, “Asia Pacific: How COVID-19 impacts vary across ASEAN.”

“On the domestic front, countries with more stringent lockdowns and a higher share of discretionary spending are likely to take a heavier toll. On the external front, a heavily trade-dependent economy such as Singapore and economies with large tourism sectors, notably Philippines and Thailand, will be hard hit,” it said.

Oxford Economics estimated that the foregone output due to lockdown measures in the Philippines is equivalent to 5.8% of gross domestic product (GDP) while the direct impact on tourism was about 12.6% of GDP.

The adverse impact on the Philippine economy based on these two factors is the highest in ASEAN-5 which is composed of Indonesia, Malaysia, the Philippines, Thailand and Singapore.

Oxford Economics measured the impact of the ongoing COVID-19 (coronavirus disease 2019) pandemic on domestic and external demand, as well as the impact of policy responses rolled out by the various governments.

Indonesia is projected to record a GDP decline of 2.7% this year, while Singapore is expected to take the steepest fall at 6%.

Metro Manila and some key cities were placed on the strictest form of lockdown for 10 weeks starting mid-March, before transitioning to more relaxed quarantine protocols.

Oxford Economics said all countries in the region have “proactively deployed monetary and fiscal policies” to mitigate the economic fallout but these are not enough to prevent recession.

“We think fiscal policy would be a more effective tool in this crisis, and while many countries delivered unprecedented fiscal packages, their fiscal impulse could be limited because a large share is earmarked for financial schemes as opposed to direct spending and revenue measures. Moreover, the wider fiscal deficits largely reflect weak revenue prospects rather than additional spending, limiting the direct economic boost,” it said.

For the Philippines, it forecast the government’s fiscal deficit to widen to more than 6% of GDP while the impact of fiscal support is expected to account for 1.7% of GDP.

“Progress in virus containment and policy space will influence the speed of economic rebound,” it added. — Beatrice M. Laforga