World Bank hikes 2021-2023 growth forecast, warns of prolonged pandemic impact

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Metro Manila (CNN Philippines, December 7) — While the World Bank expects the Philippine economy to grow faster beginning this year up to 2023, it said the impact of the COVID-19 pandemic will weigh on long-term growth.

The Washington-based lender hiked annual growth forecasts from 2021 to 2023, according to its December 2021 Philippines Economic Update.

This year, it projects a full-year expansion of 5.3% from its prior 4.3% estimate, thanks to the faster-than-expected third quarter performance.

The World Bank also expects economic output at 5.9% next year — up from its 5.8% projection in September — and 5.7% in 2023 from 5.5% figure.

The projections are anchored on the reopening of the economy and containing the spread of COVID-19, which would depend on the success of the national vaccination drive, it said.

The group, however, sounded the alarm on the long-term impact of the global health crisis.

“[T]he nearly two-year-long pandemic has already resulted in the closures of firms and losses of jobs and incomes, alongside health insecurities and education disruptions. These economic scarring may harm the country's long-term growth potential,” said the World Bank.

These factors, coupled with the higher incidence of malnutrition among the poor, led to the erosion of human capital and caused harm on future earning potential, it said.

It estimates Philippine economic output to expand by an average of 5.7% from 2020 to 2029 — short of the pre-pandemic estimate of over 6%.

The WB further said labor demand remains low, and the quality of jobs is “of concern” given the rise in workers getting absorbed in what it calls elementary occupations and own-account work.

“The labor market shock disproportionately affected the youth and female workers, and the economic scarring may cause long lasting productivity and earning losses for workers transitioning into the labor market,” read the report.

The country's unemployment rate stands at 7.4% as of October with 3.05 million Filipinos out of work — improving from the previous month's figures but still far from the 5.1% pre-pandemic level. 

However, more Filipinos have been seeking more working hours or better job opportunities during the month with the underemployment rate rising to 16.1%.

“The challenge is to limit the scarring by capitalizing on growth opportunities such as the acceleration of digitalization, and implementing a catch-up plan to mitigate the adverse socio-economic impacts of the pandemic,” expressed the World Bank.

World Bank senior economist Kevin Chua highlighted policy suggestions which include reforms that encourage market competition and reduce regulatory restrictiveness and social protection programs that are “timely and targeted.”

He also said the pursuit of a “progressive” fiscal consolidation plan — which aims to trim budget deficits and debts — that protects the country's poor will help ensure fiscal sustainability in the long term.