The Washington-based global financial industry association Institute of International Finance (IIF) expects the Philippines’ economic growth to slide to 2.6 percent in 2020 while expansion across emerging market (EM) Asia would fall to its lowest since the Asian financial crisis in 1997-1998, no thanks to the COVID-19 pandemic.
In a March 24 report titled “EM Asia And LatAm Growth Under COVID-19,” the IIF slashed its 2020 gross domestic product (GDP) growth forecast for the Philippines from 6.2 percent previously.
The government had set its growth target for this year at 6.5 to 7.5 percent, but the latest estimates of state planning agency National Economic and Development Authority had shown that full-year GDP would likely expand by a slower 4.3 percent at most or, under the worst case scenario, contracting by 0.6 percent.
Across the seven Asia-Pacific countries covered by the IIF report, which also included China, India, Indonesia, Malaysia, South Korea and Thailand, 2020 growth was projected to average 2.4 percent.
Last October, the IIF’s forecast was an average of 5.5 percent GDP expansion across these seven countries.
“We expect growth in [emerging markets] Asia and Latin America to suffer heavily from the combination of low commodity prices, financial dislocation and recession in key trading partners. As in developed markets, we project a recovery in the second half of 2020, but see some long-lasting output losses due to the impact of tight financial conditions,” IIF deputy chief economist Sergi Lanau, head of Latin America research Martín Castellano, and head of China research Gene Ma said.
“While we do not expect a recession in EM Asia, we are forecasting the lowest growth rate since the Asian financial crisis of 1997-1998, in part due to a major slowdown in China,” the IIF said.
“We expect the spillovers from low growth in China to the rest of EM to be strong, especially for commodity exporters. Elsewhere in EM Asia, we expected a gradual recovery in growth before the COVID-19 outbreak but now revise our forecast down from 4.5 percent to 1.6 percent. Countries like Indonesia enter the shock with some growth momentum but others like Thailand were already slowing in 2019. Global turmoil will be especially challenging for India,” the IIF added.
In its latest projections, the IIF sees China’s economy growing 2.8 percent this year; India, 2.9 percent; Indonesia, 2.7 percent and Malaysia, 1.1 percent.
On the other hand, South Korea and Thailand’s GDP could contract by 0.8 percent and 1.6 percent, respectively, IIF forecasts showed.