Recovery starting in Asia-Pacific but PH lagging behind peers

by Ben O. de Vera, Philippine Daily Inquirer, 25 Jul 2020

The research arm of debt watcher Moody’s on Friday said that while Asia-Pacific as a whole was already leading global economic recovery, the Philippines’ COVID-19 lockdown—now the longest and most stringent in the region—would be a drag to the domestic economy.

“The economy of the Asia-Pacific region is recovering. Most countries are easing up on lockdown requirements; only Australia, Hong Kong and the Philippines have broadly reinstated or extended such policies in reaction to growing COVID-19 caseloads. Further, high-frequency data from Google and Apple show rising mobility across much of the region,” Moody’s Analytics chief Asia-Pacific economist Steven Cochrane said in a July 22 report titled “If All the Pieces Fit: Apac Recovery Begins.”

For most of the region, growth rates are expected to accelerate next year, Moody’s Analytics said.

“All countries in the Asia-Pacific region are expec­ted to enjoy a positive econo­mic bounce in the third quarter except for the Philippines, which has suffered the longest and strictest lockdown in the region and whose count of COVID-19 cases has accelera­ted this month,” Moody’s Analytics added.

The Philippines started its COVID-19 lockdown in mid-March with an enhanced community quarantine which put a halt to 75 percent of economic activity in Luzon and other areas with high infection.

At present, 75 percent of the economy were operating under a less-restrictive general community quarantine, and the economic team had been pushing to further ease restrictions, subject to minimum health standards.

It also did not help that “travel and tourism will be the slowest component of the Asia-Pacific economy to reco­ver,” which Moody’s Analytics said accounted for 9 percent of the Philippines’ gross domestic product (GDP).

Also, “the tepid fiscal support in the Philippines and Indonesia combined with rising COVID-19 cases means these economies may likely be the laggards for recovery without significant increases in fiscal support,” Moody’s Analytics said.

Latest estimates of the Manila-based Asian Development Bank showed the Philippines’ war chest against COVID-19 as of mid-July had hit $21.05 billion or 5.72 percent of GDP.

For 2020, Moody’s Analytics projected the Philippines’ GDP to shrink by about 3 percent, before growing by about 5 percent next year.

To aid in economic recovery, Moody’s Analytics said the Bangko Sentral ng Pilipinas (BSP), alongside central banks in India and Indonesia, might have to cut interest rates some more.

“Only in the Philippines, where the country’s long and strict lockdowns may delay recovery until 2021, and in India and Indonesia, where the number of COVID-19 cases continues to expand, might there be further easing of interest rates. Otherwise, monetary policy is likely to take a back seat to the direct effects of fiscal policy, with central banks taking on the primary role of ensuring liquidity in financial markets,” Moody’s Analytics said.

The policy rate in the Philippines currently stood at a record-low of 2.25 percent following the BSP’s surprise 50-basis points cut last month, which Governor Benjamin Diokno said was aimed at “[helping] mitigate the downside risks to growth and [boosting] market confidence.”