GDP growth likely to slow to 5% this year, says Diokno

MANILA, Philippines — The impact of the novel coronavirus disease 2019 (COVID-19) is likely to drag the gross domestic product (GDP) growth of the Philippines to five percent this year, way below the 6.5 to 7.5 percent target set by economic managers.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno told The STAR the country would remain one of the fastest growing economies in the world despite the global virus outbreak.

“The Philippines, per BSP assessment, might manage to expand by five percent, from the government’s original GDP target range 6.5 to 7.5 percent. With that level of economic growth, the Philippines will still be one of the fastest growing in the world,” Diokno said in a text message.

The Philippines booked a slower GDP growth of 5.9 percent last year, missing the government’s lowered six to 6.5 percent target, due to soft global markets amid the US-China trade war, the tightening cycle by the BSP that saw interest rates jump by 175 basis points in 2018 as well as the delayed passage and implementation of the 2019 national budget.

Prior to the implementation of the enhanced community quarantine in Luzon by Malacañang, Diokno was hoping the Philippines could still book a GDP growth of about six percent this year.

However, financial markets and businesses ground to a halt as Filipinos were told to stay at home to prevent further spread of the dreaded virus.

“The COVID-19 public health crisis which I consider to be a once in a lifetime occurrence is going to affect the global economy, the Asia Pacific region, and even the Philippines. Many developed countries might face a recession. The global economy might face a recession,” Diokno said.

The BSP chief pointed out the Association of Southeast Asian Nations (ASEAN) might book a slower growth of three percent.

“Our focus should be how to get out of this quagmire ASAP. I think, by and large, the Philippine government is doing the right thing. The private sector is supportive. It is the patriotic duty of every Filipino to cooperate,” he said.

The central bank’s Monetary Board imposed a deeper cut of 50 basis points last Thursday as a follow on to the easing cycle to soften the impact of the COVID-19 pandemic.

This brought the interest rate cuts to 150 basis points since May last year, almost reversing the tightening cycle in 2018 that saw rates jump by 175 basis points.

By reducing interest rates, more funds will be made available for lending at a cheaper cost, thereby boosting consumption and investments for businesses, households, and individuals and helping them cushion the impact of the virus outbreak.