Metro Manila (CNN Philippines, March 23) — The Philippine economy is poised to see its slowest growth in nearly a decade as the novel coronavirus pandemic ruins productivity and renders more people jobless, S&P Global Ratings said Monday.
The credit rater projects the Philippine economy would expand by just 4.2 percent this year, a marked slowdown from the 5.9 percent logged in 2019. This is also a big dip from its previous 5.8 percent estimate, and would sorely miss the government’s 6.5-7.5 percent growth target.
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The latest forecast is also well below the already tempered forecast of the National Economic and Development Authority, which pegs growth at 5.5-6.5 percent this year should the coronavirus impact last until June. The entire Luzon, including the country’s central hub Metro Manila, has been placed under a month-long quarantine, with most establishments and companies shut down in a bid to contain the spread of the virus.
This would be the slowest growth seen since 2011, when the economy picked up by 3.9 percent.
“As household and business confidence in these economies erodes, we will start to see domestic demand suffer,” S&P also said in a March 17 commentary.
S&P slashed growth forecasts for Asia-Pacific, saying last week that a recession is guaranteed in the region as COVID-19 holds economies hostage. The disease — which has infected over 335,000 people and killed more than 14,600 worldwide — would result in losses worth $620 billion for the region. The huge cost would be borne by governments, companies, and families.
Despite the slashed growth estimate, the Philippines would remain among the fastest-growing economies in the region next to India (5.2 percent) and Vietnam (5 percent), according to the debt watcher.
“Economies will contract in Hong Kong, Singapore, South Korea, and a newly deflationary Japan. The region’s average growth rate will be 2.7 percent,” S&P said in a statement.
China, the source and previous epicenter of the outbreak, would see growth ease from 6.1 percent in 2019 to 2.9 percent this year, according to S&P estimates. The numbers could still change should there be “higher-than-normal uncertainty” over the disease.
Quieter economic activity and global trade would also push prices of basic goods down, with the credit rater seeing inflation easing across the region. Philippine prices are now seen to rise by just 1.6 percent versus last year’s 2.5 percent, which would also be well below the central bank’s 2-4 percent desired band.
However, S&P also expects more Filipinos jobless as the coronavirus continues to hound businesses. From 5.1 percent, the credit rater expects the unemployment rate to shoot up to 6 percent by year-end.
The tourism and aviation sector are said to be the hardest hit by the outbreak, with travelers canceling plans and airlines limiting local and international flights.
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S&P also sees the Bangko Sentral ng Pilipinas cutting the key interest rate further to end up at 2.75 percent this 2020, suggesting further cuts are expected after two consecutive adjustments in February and March. BSP Governor Benjamin Diokno said the “assertive” 50-basis-point cut in rates was meant to boost market confidence, at a time when local stock prices are plunging as COVID-19 cases rise in the country.
By 2021, however, the Philippines is seen to bounce back and grow by 7.5 percent, owing largely to a lower base year. Other economies are likewise seen to recover, including those which contracted.
“S&P Global Ratings acknowledges a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak. Some government authorities estimate the pandemic will peak in June or August, and we are using this assumption in assessing the economic and credit implications,” the debt watcher added.
“We believe measures to contain COVID-19 have pushed the global economy into recession and could cause a surge of defaults among nonfinancial corporate borrowers.”
There are 380 confirmed cases of COVID-19 in the Philippines including 25 deaths, the Department of Health confirmed as of Sunday. Of them, 17 patients have recovered.
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