Moody’s: NCR lockdown to further dampen Philippine recovery prospects

by Lawrence Agcaoili (The Philippine Star), 4 Aug 2021

MANILA, Philippines — The reimposition of stricter lockdown and quarantine measures in the National Capital Region (NCR) starting Friday could further dampen the recovery prospects of the Philippines from the pandemic-induced recession, according to Moody’s Investors Service.

In a virtual media roundtable, Moody’s senior vice president Christian de Guzman said the reimposition of enhanced community quarantine in NCR due to the more contagious Delta COVID-19 variant creates a downward pressure on economy.

“We have maintained our 5.8 percent forecast in this latest assessment and that does not increase the impact of the lockdown that we’re about to enter into,” De Guzman said.

De Guzman also said the debt watcher would review the impact of the latest lockdown, factoring in the GDP figure for the second quarter of the year to be released by the government in the coming weeks.

“So we will be revisiting the full year forecast once that figure is out,” he said.

The pandemic-induced recession stretched to five quarters as the country’s GDP shrank by 4.2 percent in the first quarter as the NCR and nearby provinces or NCR Plus was placed on strict lockdown from March to mid-May due to the resurgence of COVID-19 cases.

The Philippines slipped into recession with a record 9.6 percent GDP contraction last year.

Just like other Baa2-rated economies, De Guzman said the Philippines is likely to return to pre-pandemic levels by the end of 2022.

He said the Philippines is one of the most affected countries in terms of economic scarring.

“That’s simply a function of what happened last year, the Philippines suffered one of the largest economic contractions from the pandemic shock. And this was coming from a situation of a very high average growth coming into the pandemic. But because of the shock, the hole that they had dig out of is very deep,” De Guzman said.

De Guzman also cited the slow rollout of COVID-19 vaccines in the Philippines.

The debt watcher also noted risks arising from the uncertainties from the Presidential and national elections in May next year.

“It would also perhaps have an impact in terms of how we see the Philippines. Overall assessment of political risk, which doesn’t just include domestic political, but also geopolitical risks. One of the features over the last couple of years has been, I think, some of the wrangling with regards to the South China Sea,” De Guzman said.

Unlike previous elections wherein government and consumer spending boost the economy, De Guzman explained the situation right now is different because of the impact of the COVID-19 pandemic.