(Bloomberg) -- The Philippine government lowered its outlook for the economy this year, now expecting a contraction of 8.5% to 9.5% as the country battles the second-worst virus outbreak in Southeast Asia.
The new forecast is significantly worse than the 4.5%-6.6% contraction predicted in July, but -- given the 10% decline in gross domestic product through the third quarter -- indicates expected improvement in the final three months of the year. Private economists surveyed by Bloomberg forecast the economy to shrink 8.9% this year.
Philippine Economy Signals Shaky Rebound From Worst of Virus in Third Quarter
Government economic managers expect a rebound next year, maintaining their prediction of 6.5%-7.5% growth in 2021, while raising the 2022 forecast to 8%-10% growth, Budget Secretary Wendel Avisado said in a briefing. The faster growth in 2021 and 2022 assumes the economy will operate under looser movement restrictions, he said.
“As the economy gradually moves toward full reopening, we expect significantly better economic outcomes next year,” Avisado said. The Philippines, which experienced one of the longest and strictest lockdowns in the world, must continue to progressively reopen businesses and mass transport, he said.
The government lowered this year's budget deficit ceiling to 7.6% of gross domestic product, from a previous cap of 9.6%, based on a stronger revenue forecast. It raised the deficit ceiling for 2021 and 2022 due to higher spending.
“The economy is just waiting for this fear factor to be removed, for people to have confidence that they don't get sick,” Finance Secretary Carlos Dominguez said. The economy can recover even without massive stimulus, he added.
Investment in infrastructure and an expectation that all forms of quarantine will be lifted by 2022 should help boost growth, Economic Planning Secretary Karl Chua said.
| 2020 | 2021 | 2022 | ||||
|---|---|---|---|---|---|---|
| New | Previous | New | Previous | New | Previous | |
| GDP Growth | -8.5% to -9.5% | -4.5 to -6.6% | unchanged | 6.5% to 7.5% | 8% to 10% | 6.5% to 7.5% |
Budget Deficit (% of GDP) | 7.6% | 9.6% | 8.9% | 8.5% | 7.3% | 7.2% |
| Inflation | 2.4% to 2.6% | 1.75% to 2.75% | unchanged | 2% to 4% | unchanged | 2% to 4% |
| USD-PHP | 48-50 | 50-52 | 48-53 | 50-54 | 48-53 | 50-54 |
©2020 Bloomberg L.P.
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