The WB lowers its GDP growth forecast by 21 PH

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The World Bank (WB) sees the Philippines’ gross domestic product (GDP) grow 4.3% this year – slower than expected – as the more contagious Delta strain of COVID-19 and the relatively slower vaccine deployment weighs on economic recovery.

The World Bank’s Fall Economic Update 2021 report for East Asia and the Pacific, released on Tuesday, showed a weaker 2021 growth forecast for the Philippines than the 4.7 % of June and 5.5% of last March. The latest forecasts are in line with the government’s lower growth target of 4 to 5 percent for the year, unlike at the start of the year when the economics team was aiming for an expansion of 6.5 to 7.5 percent.

While other economies in the region like China, Indonesia and Vietnam have already returned to their pre-pandemic economic production levels, followed by Cambodia, Malaysia and Mongolia next year, it It will take until 2023 for the Philippines, Thailand and Pacific island states to recapture lost ground, the World Bank said.

In the cases of the Philippines, Indonesia and Vietnam, the World Bank said it did not help that these countries initially had difficulty securing vaccine supplies to cover their relatively larger populations.

The World Bank’s chief economist for East Asia and the Pacific, Aaditya Mattoo, also pointed out during a press briefing that the Philippines had previously faced issues of reluctance to -visions of vaccines.

Mattoo said the Philippines and Indonesia are expected to vaccinate up to 60% of their huge population by the middle of next year.

magic number

“This 60 percent [vaccination threshold] is not a magic number; this is a target which we believe has certain implications for the resumption of economic activity, ”said Mattoo.

But more than mass vaccination, Mattoo said the rebound from the pandemic-induced economic crisis would require reforms, for example, to attract private sector investment, such as those undertaken by the Philippines and Indonesia.

Mattoo was referring to the recent reduction in corporate tax rates in the Philippines, not only to ease the tax burden on hard-hit businesses, but also to incentivize expensive new investments to locate here. The Philippines was also preparing to lift restrictions on foreign capital in retail trade and utilities such as energy and telecommunications.

But the World Bank said more social investments were needed to tackle the pandemic’s long-term healing effect on people’s livelihoods.

“In Indonesia and the Philippines, up to eight million more people would remain trapped in poverty in 2023 if the recovery is not accompanied by policies to reduce inequalities,” warned the World Bank.

In the Philippines, the World Bank has stated that “if growth forecasts are maintained and household incomes recover with stable inflation, the poverty rate is likely to continue its downward trend until 2023”, but “the reimposition of stricter community quarantines over long periods may slow the pace. poverty reduction.

The World Bank also cited that while an “increase in cash transfers helped protect millions of people from the worst economic effects of the pandemic” last year, distributions “do not meet needs in 2021 in Myanmar, Philippines and Timor-Leste. . “

“Unlike many other countries in the region, the Philippines is increasingly facing an increasingly tight budget constraint,” Mattoo noted, although he acknowledged that it would be difficult to find a perfect combination. support for households and businesses in difficulty, which will ultimately increase. it is up to the government to make these “not easy choices”.

“In Indonesia, Mongolia and the Philippines, businesses lost on average at least 40% of their usual monthly sales and cut jobs. The failure of otherwise viable businesses results in the loss of valuable intangible assets, such as supplier or customer relationships and know-how. Surviving companies postpone productive investments. Unemployment can erode human capital and harm future income. These negative effects on growth are likely to be greater than any benefits of the creative destruction induced by the crisis, ”the World Bank said.

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