COVID-19 to weigh down economic growth for the rest of 2020

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Metro Manila (CNN Philippines, March 20) — The novel coronavirus pandemic would have a longer and more disruptive impact on the economy, with the Bangko Sentral ng Pilipinas (BSP) seeing sluggish growth for the rest of 2020.

The central bank said the slowdown due to COVID-19, particularly the month-long shutdown of Luzon to contain the spread of the disease, would drastically pull down domestic activity.

"The implementation of the enhanced community quarantine in Luzon could further dampen domestic economic activity," the BSP said in a report sent to journalists.

"The latest assessment assumes a U-shaped recovery with the impact of COVID-19 lasting until H2 (second half of) 2020 but with the economy expected to rebound by 2021," it added.

Globally, economists fear that the outbreak could trigger another recession as numerous countries, including the biggest markets, have been downed by the disease.

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The National Economic and Development Authority has scaled down its growth forecast for the Philippines to 5.5-6.5 percent, a huge slowdown when compared to the 6.5-7.5 percent goal set for the entire year. This assumes that COVID-19 woes would last only until June.

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The economy expanded by 5.9 percent in 2019, missing the full-year target as construction activities and other state projects were bogged down by the delayed passage of the national budget.

The BSP unveiled an "assertive" rate cut on Thursday, where it trimmed the benchmark yield by 50 basis points to 3.25 percent as monetary officials sought to restore investor confidence as coronavirus cases in the country continued to climb.

The Philippine Stock Exchange shut down trading for two days as Luzon went under "enhanced community quarantine," which restricted the movement of people and shut down most establishments until mid-April. When trading resumed, stocks crashed by as much as 24 percent, and is now at an eight-year low at the 4,000 level.

The BSP said tourism, trade, and remittances are most affected by the global pandemic. On the flipside, weak consumption coupled with plunging global oil prices would temper inflation greatly. Prices of basic goods are now expected to rise by just 2.2 percent, versus the 2.5 percent average in 2019.