Moody’s: Philippines to grow by 7%

Lawrence Agcaoili - The Philippine Star
Moody�s: Philippines to grow by 7%
Christian de Guzman, senior vice president of the sovereign risk group at Moody’s, said the rebound is expected to happen this year after a deeper GDP contraction of 8.7 percent last year.
STAR / File

MANILA, Philippines — The Philippines is likely to recover from the pandemic-induced recession with a seven percent gross domestic product (GDP) growth this year, according to Moody’s Investors Service.

Christian de Guzman, senior vice president of the sovereign risk group at Moody’s, said the rebound is expected to happen this year after a deeper GDP contraction of 8.7 percent last year.

The growth forecast set by the debt watcher is well within the 6.5 to 7.5 percent made by the Development Budget Coordination Committee (DBCC) for this year after a deeper contraction of 8.5 to 9.5 percent last year.

The projected GDP growth for the Philippines for this year is the same as that of China, Malaysia and faster than Cambodia’s 5.9 percent, Indonesia’s 4.7 percent, Thailand’s four percent, and Taiwan’s 3.7 percent.

Vietnam is expected to book a GDP growth of 7.2 percent this year, faster than last year’s 2.9 percent.

“In India, the Philippines, Hong Kong and Singapore, continuing pandemic-related constraints inhibit a complete recovery to 2019 output levels in 2021, despite our projections of relatively rapid real GDP growth,” Moody’s said in a  report titled “2021 outlook negative as pandemic shock amplifies vulnerabilities, while governance strength drives asymmetric recovery.”

Moody’s said its outlook for sovereign creditworthiness in Asia Pacific (APAC) is negative overall, reflecting its expectations for the fundamental conditions that will drive sovereign credit over the next 12 to 18 months.

“The widespread fallout from the pandemic and the measures adopted by sovereigns to contain it has created an economic, fiscal and social shock that will last into 2021 and beyond. Recovery across the region will be shaped by policy effectiveness in containing the pandemic,” it said.

Over the near term, the debt watcher said sovereigns would face an erosion of their fiscal positions as governments provide ongoing economic support, with the weakening most severe for the lowest-rated sovereigns.

“Risks related to the pandemic persist, as demonstrated by renewed outbreaks in the closing months of 2020 and early 2021. For now, the recovery in different parts of the economy will be staggered,” Moody’s said.

Moody’s said unemployment would remain higher than pre-pandemic levels, constraining domestic consumption.

Unemployment in the Philippines has steadily improved to 8.7 percent in October from 10 percent in July and a record 17.7 percent in April.

“Most APAC sovereigns ended 2020 with multi-year highs in unemployment, although still generally low by global standards, despite some evidence of job market recovery as reported in India and the Philippines,” Moody’s said.

Likewise, Moody’s said the ongoing restrictions on cross-border travel that hamper the deployment of migrant labor may not only exacerbate joblessness in source countries such as the Philippines, Bangladesh, and India, but also weigh on remittances, notwithstanding the resilience of such flows last year.

Moody’s said the pandemic has reversed the reduction in debt burdens in the Philippines, Fiji, and New Zealand as the national government borrows more to fund COVID-19 response programs.

“In Malaysia, the Philippines and Thailand, domestic absorption of government debt at low interest rates even before the pandemic was anchored by broad macroeconomic stability,” the debt watcher said.

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