However, the Washington-based multilateral lender said that "there are good chances that the country can bounce back in the next two years."
The report, titled Braving the New Normal, says the eruption of Taal Volcano and the global outbreak of Covid-19 including the strict containment measures against the pandemic have led to severe disruptions in manufacturing, agriculture, tourism, construction, and trade.
The cumulative impact of these events on the economy has been broad-based, steep, and deep, halting investment activity, and leading to the lowest consumption growth in three decades, the report says.
"During these difficult times, strengthening the capacity of the health care system to control the outbreak while protecting poor and vulnerable households remains an urgent task for the country," Achim Fock, World Bank Acting Country Director for Brunei, Malaysia, Philippines and Thailand, said in a statement.
"Similarly, financial support to affected firms, especially small and medium enterprises, to prevent job losses and bankruptcy, can help ensure that the recent shocks do not cause permanent damage to the country's productive capacity and human capital," Fock added.
The report says growth forecast for 2020 assumes that the containment measures will gradually ease in the second half of the year, and economic activities return in some sectors of the economy.
Given income losses and heightened uncertainty, household consumption and private investment are expected to remain weak, adds the report.
However, it says that economic growth prospects and poverty figures are expected to improve in succeeding years driven by a rebound in consumption, a stronger push in public investment, supportive fiscal and monetary policies, and the recovery of global growth.
The Philippines' economic growth is projected to return to above 6 percent in 2021 and 7 per cent in 2022, the report says.
The report also says that the Philippines' strong fundamentals, built over decades of structural reforms, has helped the economy to cope with the COVID-19 pandemic.
"The Philippines has abundant external reserves and the lowest public external debt in East Asia and the Pacific Region. Also, the country has the highest reserve ratio in the region, indicating that monetary policy has plenty of room to inject liquidity into the economy and help boost growth," the report says.
Rong Qian, World Bank senior economist, said the Philippines' digital infrastructure will play a critical role in its economic recovery.
"Measures that restrict mobility, regulate physical contact, and limit business activity have forced more businesses and families to use the internet for transactions," Qian said.
"This change in consumer behaviour and firm operations is expected to continue even after quarantines end. To take full advantage of this situation and help the economy recovering from the losses it has suffered due to the lockdown, the country must ramp up its efforts to accelerate the digitalization of the economy," she added.
Among the recommendations of the report are creating an enabling policy environment for a competitive broadband market and enhanced access to affordable internet services throughout the country. - Xinhua/Asian News Network