S&P expects Philippines growth at 5.8% this year

MANILA, Philippines — S&P Global Ratings slashed this year’s economic growth forecast anew for the Philippines to below six percent amid the coronavirus disease 2019 (COVID-19) outbreak.

 In its latest report titled “COVID-19 now threatens more damage to Asia Pacific,” the debt watcher said the GDP growth of the Philippines would soften further to 5.8 percent this year after slowing down to 5.9 percent last year.

This is the second time in three weeks S&P lowered the GDP growth forecast for the Philippines. The debt watcher slashed the country’s growth projection to 6.1 percent last February from 6.2 percent in December.

Economic managers through the Development Budget Coordination Committee (DBCC) penned a GDP growth target range of 6.5 to 7.5 percent for this year.

Despite the reduction, the Philippine economy is expected to be the second fastest growing in Southeast Asia after Vietnam’s six percent. Indonesia is seen growing by 4.7 percent, followed by Malaysia’s 3.9 percent, Taiwan’s 1.9 percent, Thailand’s 1.6 percent, and Singapore’s zero percent.

For Asia Pacific, S&P lowered the GDP growth forecast to four percent this year. It slashed the growth projection for China to 4.8 percent, while the economy of Hong Kong is seen contracting by 0.8 percent and Japan by 0.4 percent this year. 

S&P pointed out COVID-19 could knock $211 billion from Asia Pacific incomes, thereby slowing GDP growth in the region with some countries entering or flirting with recession.

It warned the loss would be distributed across households, firms, banks and government.

S&P said a U-shaped recovery is likely to be delayed until the third quarter if signs emerge by the second quarter that the virus is globally contained.

“Our U-shaped recovery has been pushed back to later in 2020 due to a harder hit to China’s economy in the first quarter, viral transmission outside China, and tighter financial conditions,” it said.

The debt watcher said Asia Pacific’s outlook has darkened due to the global spread of COVID-19.

“We also reflect a harder first-quarter hit to China’s economy than we had anticipated. The final consideration is the tightening of global financial conditions that will amplify these economic shocks. We factor in global policy easing, but this will only cushion the blow,” S&P said.

S&P said more policy easing is likely across the region, but financial conditions are key for emerging markets policies, while targeted fiscal measures would remain prominent in almost all economies with further support to disrupted sectors and households in the form of temporary tax relief and transfers.

“In emerging markets, especially those running current account deficits such as India, Indonesia and the Philippines, further rate cuts are dependent on the space afforded by the US Federal Reserve and global financial conditions given the risk of igniting capital outflows,” the debt watcher said.