Philippines most vulnerable due to Delta variant

MANILA, Philippines — The research arms of debt watchers Moody’s and Fitch said the Philippines is among the most vulnerable economies in Asia as the country continues to struggle to contain the pandemic with the emergence of the highly contagious Delta variant.

In a report, Moody’s Analytics chief economist Steven Cochrane said countries with any combination of low vaccination rates, high incidence of new cases, and high death rates are at high risk of longer and stricter movement controls that could slow or constrict the pace of economic growth.

The Philippines ranked 15th in relative economic risk from the pandemic among the 20 countries ranked by Moody’s Analytics, edging out Indonesia, Malaysia, Vietnam, Sri Lanka, Thailand and Malaysia.

“The Philippines and Indonesia will struggle with less effective COVID-19 policies – vaccine shortages and ineffective social distancing measures – that create much uncertainty on the timing of a rebound,” Cochrane said.

Cochrane also said the Philippines, India, Malaysia, Singapore, Hong Kong and even Taiwan have seen single-quarter gross domestic product (GDP) declines in the first or second quarter.

He said the Philippines, Malaysia, Singapore and Hong Kong have been the most volatile, each experiencing a quarter-to-quarter decline of GDP in the second quarter.

The Philippines exited the pandemic-induced recession after recording a GDP growth of 11.8 percent in the second quarter.

However, quarter-on-quarter, the real GDP contracted by 1.3 percent in the first quarter versus the 0.7 percent expansion in the first quarter. Real GDP measures a country’s total economic output, adjusted for price changes.

“And in all of these, but the Philippines, the decline followed robust double-digit percent growth in the first quarter on a seasonally adjusted annualized rate basis,” Cochrane said.

According to Moody’s Analytics, new COVID cases relative to population size in the Philippines, Japan, Vietnam as well as Malaysia and Thailand are high and rising with the emergence of the Delta variant.

Despite intermittent lockdowns, including the enhanced community quarantine in the National Capital Region and nearby provinces from Aug. 6 to 20, COVID cases in the Philippines breached two million with more than 33,000 deaths.

“The impact on the Asia-Pacific economy will be deep for the current third quarter and could extend into a weak fourth quarter if the recent wave is not soon contained,” Cochrane said.

Moody’s Analytics said the least vulnerable economies in the region are Singapore, China, Cambodia, Hong Kong and Japan due to low new COVID cases as well as high vaccination rates.

“In other words, not only have they aggressively vaccinated their populations, but they have contained recent outbreaks, which has allowed their healthcare systems to treat those who are ill,” Cochrane said.

On the other hand, Fitch Solutions Country Risk & Industry Research slashed its GDP growth forecast for Asia to 7.8 percent from the original target of 7.9 percent this year.

In a report, Fitch Solutions said the region’s recovery has been constrained by low COVID-19 vaccination rates and the emergence of the more transmissible Delta variant.

“The wider Asia region has also been helped by low base effects from 2020, as well as China’s quick recovery from the pandemic. However, risks to growth have risen due to the emergence of the more transmissible Delta variant, which has caused several markets to implement renewed lockdown measures and significantly postpone border re-openings,” Fitch Solutions said.

It also said the Philippines, Thailand, and Malaysia are experiencing the significantly worse outbreaks since the onset of the COVID-19 pandemic with relatively low vaccination rates.

Moody’s Analytics recently slashed its GDP growth forecast for the Philippines to four percent from the original target of 4.9 percent for this year, while Fitch Solutions lowered its forecast to 4.2 instead of 5.3 percent.