Fitch sees Philippines economy contracting by 8%

MANILA, Philippines — Fitch Ratings now expects a deeper economic contraction of eight percent for the Philippines amid the rampaging COVID-19 pandemic.

“The continued spread of COVID-19 in the Philippines has necessitated renewed lockdown measures in and around the capital of Manila, which are likely to depress economic growth by much more than Fitch Ratings had anticipated,” the debt watcher said in a report in August.

Fitch said  earlier its forecast of a four percent contraction appeared optimistic and may be revised down further amid the  pandemic.

All key credit rating agencies are expecting a deeper recession for the Philippines with S&P Global Ratings recently revising downwards its forecast to a contraction of 9.5 percent instead of three percent this year, while Moody’s Investors Service further lowered its projection to a contraction of seven percent instead of 4.5 percent.

Economic managers, through the Development Budget Coordination Committee (DBCC), now expect a deeper GDP contraction of 4.4 to 6.6 percent instead of two to 3.4 percent this year and a slower recovery with a GDP growth of 6.5 to 7.5 percent instead of eight to nine percent next year.

In a virtual webinar series organized by the Iloilo Business Cub, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said business activities have been disrupted as the surge in COVID-19 cases around the world continues.

“The Philippines is not spared. The local economy declined by nine percent in the first half. The great fall was not because the economy was weak. It was because there is a need to shut it down to buy time, to delay the spread of the virus while building the country’s health capacity,” Diokno said.

The BSP chief said the COVID-19 pandemic is unlike any of the previous crises including the 1980 debt crisis, the 1997 Asian financial crisis, and the 2007 global financial crisis that originated from the financial sector.

Diokno, however, reiterated that the Philippine economy is fundamentally strong with a sound fiscal position via a manageable fiscal deficit and low levels of government indebtedness as well as low interest rates, manageable inflation, stable peso as well as healthy external accounts with a record gross international reserves of $98.95 billion as of end- August.