Fitch unit cuts Philippines growth forecast to 6%

MANILA, Philippines — Fitch Solutions Macro Research cut its 2020 economic growth forecast for the Philippines to six percent amid the impact of the global outbreak of the novel coronavirus disease (COVID-19)

In a report, Fitch Solutions said the growth of the Philippine economy is expected to be more modest than initially anticipated due to the virus outbreak.

“As such, we at Fitch Solutions have lowered our real GDP growth forecast to six percent in 2020, from 6.3 percent previously, which despite our revision, still reflects our view for a slight pick-up from 5.9 percent in 2019,” it said.

The research arm of the Fitch Group said the major risk to the revised GDP growth is a sudden surge in the number of domestic cases in the Philippines or a more prolonged impact on external demand.

Fitch Solutions said the exports sector, specifically tourism, is likely to see intense headwinds from the COVID-19 outbreak.

Furthermore, it said major infrastructure projects could face delays, while households would receive weaker remittance inflows.

The Development Budget Coordination Committee (DBCC) expects a GDP growth of between 6.5 and 7.5 percent for this year.

The economy eased to an eight-year low of 5.9 percent last year from 6.2 percent in 2020, missing the lower end of the government’s six to 6.5 percent target.

“In 2019, growth slipped to 5.9 percent as China-US trade tensions, sluggish foreign direct investment inflows, the pass-through effects of monetary tightening in 2018 and a delayed 2019 budget fed through to weaker growth,” Fitch Solutions said.

In response, Fitch Solutions said the Philippines announced a 12 percent ramp-up in fiscal expenditure in 2020 alongside a roll over of unused funds from the 2019 budget, ensuring a significant boost from fiscal stimulus.

“Indeed, we expect fiscal stimulus to be a key driver of growth, with government consumption set to contribute a forecast two percentage points to headline growth,” it said.