S&P raises growth outlook on Philippines, but warns of 'Omicron' threat

A worker in personal protective equipment sprays disenfectant inside a cinema in Manila on October 14, 2021, ahead of the reopening of movie houses following a sharp fall in the daily number of coronavirus infections and increased vaccinations.
Maria Tan / AFP

MANILA, Philippines — S&P Global Ratings raised its growth forecasts for the Philippines following the economy’s forecast-beating expansion in the third quarter, but the debt watcher warned the emergence of new COVID variants such as Omicron would add to the complexity of managing the virus in Asia-Pacific.

From its old projection of 4.3%, S&P now expects the Philippines to grow 5% this year after the economy smashed expectations last quarter with its 7.1% year-on-year growth despite renewed restrictions.

S&P’s new prediction matches that of the government, which expects the economy to grow 4-5% this year. Data showed gross domestic product growth averaged 4.9% in the first three quarters of 2021 and economic managers believe the economy can surpass the state’s watered-down target for this year.

However, a stronger 2021 figure means S&P had to lower its forecast for 2022 to 7.4%, from 7.7% previously, because of the higher base.

“Growth in the Philippines surprised on the upside,” the credit rating agency said.

From the previous practice of sealing off an entire region, the Philippine government in September started implementing “granular” lockdowns with varying alert levels. The move was meant to minimize any economic losses from prolonged restrictions, which could cost the economy a total of P41.4 trillion over the next 40 years based on government estimate.

But the Philippines is still slow in vaccinating its people, which could make it vulnerable to future surge in cases that may be fueled by more contagious coronavirus variants. As of November 29, the country has vaccinated 32.9% of its total population.

According to S&P, the arrival of new COVID variants such as Omicron may trigger more mobility controls in the Asia Pacific region, whose pandemic policies have put it “on a weaker recovery path than the rest of the world.”

“While the region was highly successful in curbing the spread of the virus early in the pandemic, it was slow to vaccinate, and is now only gradually reopening borders and relaxing mobility,” S&P said.

“While living with the virus has reduced COVID's impact on the economic outlook, new outbreaks of unknown severity cast a shadow on this narrative,” it added. — Ian Nicolas Cigaral



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