Philippines growth target down to 5.4 % — Moody’s

Lawrence Agcaoili - The Philippine Star

MANILA, Philippines — Moody’s Investors Service slashed anew the gross domestic product (GDP) growth forecast for the Philippines to 5.4 percent this year due to the impact of the coronavirus disease 2019 or COVID-19.

This is the second time in less than a month that the debt watcher lowered the GDP growth target for the Philippines due to the rapid spread of the virus around the world.

Despite the reduction, Moody’s said the Philippines would remain the second fastest growing economy in Southeast Asia after Vietnam.

The country’s GDP growth would be faster than Indonesia’s 4.8 percent, Malaysia’s three percent, and Thailand’s 1.8 percent.

Economic managers expect a GDP growth forecast of between 6.5 percent for this year after slowing to 5.9 percent last year from 6.2 percent in 2018 due to soft global markets amid the US-China trade war, the tightening cycle by the Bangko Sentral ng Pilipinas (BSP) that saw interest rates jump by 175 basis points in 2018, and the impact of the delayed passage of the 2019 national budget.

They said earlier the impact of the COVID-19 outbreak could slash the growth by as much as one percent, bringing the range to 5.5 to 6.5 percent.

However, the last projection did not factor in the impact of the enhanced community quarantine imposed by Malacañang starting March 17 that resulted in the closure of the financial markets as well as major businesses until April 12.

Likewise, Moody’s said it has lowered the projected global GDP growth to 2.8 percent for 2020, assuming a pullback in consumption and ongoing disruption to production and supply chains in the first half, followed by a recovery in the second half.

The debt watcher said there is significant economic fallout from more rapid and wider spread of COVID-19 around the world.

“Dampening of domestic consumption demand in affected countries exacerbates disruptions to supply chains and cross-border trade of goods and services; the longer the disruptions last, the greater the risk of global recession becomes. Risks skewed to the downside,” it said.

It also said that oil price shock adds to growth and fiscal pressure for countries highly exposed to the virus outbreak.

“A period of lower oil prices will further weigh on the economic and fiscal fundamentals of oil exporters, while mitigating the trade shock for importers,” Moody’s said.

Moody’s said a number of government and central banks have announced countervailing measures, including fiscal stimulus packages, policy rate cuts, and regulatory forbearance.

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