Philippines to slump deeper — S&P

by Lawrence Agcaoili (The Philippine Star), 27 Jun 2020

MANILA, Philippines — Credit watchdog S&P Global Ratings now expects a deeper economic contraction for the Philippines, which is going through one of the world’s longest lockdowns to prevent the further spread of the coronavirus disease 2019 or COVID-19.

In its latest research titled “Asia Pacific losses near $3 trillion as balance sheet recession looms,” the global debt watcher said Philippine gross domestic product (GDP) is now seen to contract by three percent instead of its earlier forecast of 0.2 percent.

“The Philippines imposed among the world’s longest tight lockdowns but new COVID-19 cases remain stubbornly high. Economic activity has stalled and we expect the economy to shrink three percent this year, compared with growth of six percent in 2019,” S&P said.

The last time Philippine GDP contracted was in 1998 at 0.5 percent due to the Asian financial crisis. In the first quarter, GDP already shrank by 0.2 percent, ending 84 straight quarters of growth.

Economic managers, through the Development Budget Coordination Committee (DBCC), expect GDP to contract between two and 3.4 percent this year as the entire Luzon was placed under enhanced community quarantine since March 16.

“We expect the permanent costs of COVID-19 to be highest in India and the Philippines, due mainly to the severity of lockdowns, and in Thailand given its high exposure to international travel,” S&P said.

In the region, Vietnam is expected to post a GDP growth of 1.2 percent this year, followed by Indonesia with 0.7 percent and Taiwan with 0.6 percent. Aside from the Philippines, Thailand’s GDP is expected to sink by 5.1 percent, followed by Singapore with five percent, and Malaysia with two percent.

S&P expects the GDP of Asia Pacific shrinking by 1.3 percent instead of growing by 0.3 percent this year, implying $2.7 trillion of lost output for 2020 and 2021, even assuming broad containment of the coronavirus.

“We expect the COVID-19 pandemic to leave lasting scars on Asia Pacific, with the extraordinary measures needed to shore up economies leading to higher debt, weaker balance sheets, and less appetite for spending in the future,” it added.

S&P said the Philippines is expected to book a strong rebound, with a GDP growth of 9.4 percent in 2021, 7.6 percent in 2022 and 7.5 percent in 2023.

“We forecast growth will rebound to 9.4 percent next year as activity resumes. Risks to the recovery path include the persistent spread of the coronavirus and weakened balance sheets in the private sector due to the length and magnitude of the downturn,” it said.

Malacañang has eased the lockdown by placing the National Capital Region (NCR) under the general community quarantine last June 1 to help jumpstart the Philippine economy.

Economic managers are expecting a stronger recovery with a GDP growth of eight to nine percent instead of 7.1 to 8.1 percent next year.