The Philippines' Economic Recovery Will Lag Due to Virus Missteps, Says World Bank
The Philippines’ economic recovery from the pandemic will lag its regional peers, according to the World Bank, as it struggles to move beyond strict lockdowns and stimulus that have been inefficient and inadequate.
The Southeast Asian nation’s “highly decentralized” health system, and lockdowns that were “super draconian” but “porous,” made for a disastrous combination, Aaditya Mattoo, the World Bank’s chief economist for the East Asia and Pacific region, said in an interview ahead of a regional report released Friday.
“You incurred the economic distress without getting the containment benefit,” Mattoo said. That contrasts with countries like China and Vietnam, which moved swiftly to “smarter containment” measures involving testing and tracing.
Mattoo’s team judged an economy’s recovery path on three factors: management of the virus, trade exposure to the rest of the world and the government’s capacity to provide support. The Philippines underperformed on all three, they determined.
- Covid cases remain high despite the severe lockdowns and, at 0.2 doses per 100 people as of March 17, the Philippines is in the lower half of 15 regional countries in its vaccination drive, World Bank data show
- Others in the region, including Thailand and Malaysia, could take advantage of surging electronics demand and a global upswing in trade, while the Philippines remained over-reliant on tourism and remittances, which have contracted as overseas workers came home. Supply problems also were exacerbated by Typhoon Goni last year
- The Philippines’ stimulus was not well targeted, with households that didn’t lose income just as likely to receive aid as those that did. Household earnings dropped by almost 8% of gross domestic income, also on the higher end for the region’s economies, the World Bank data show. The Philippines is “relatively conservative in its fiscal position and they’re not a country which is under any severe domestic debt,” Mattoo said.
The Philippine economy will probably expand 5.5 percent this year and 6.3 percent in 2022, staying below its pre-pandemic levels through most of next year, according to the World Bank’s report Friday. That’s after its 9.5 percent contraction last year, the region’s worst aside from smaller Pacific Island countries.
“In the Philippines, growth is expected to recover in the medium term, contingent on an improved external environment, a successful vaccination program, and the loosening of movement restrictions,” according to the report.
--With assistance from Philip J. Heijmans.
© 2021 Bloomberg L.P.