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S&P: PH economy to contract 3% in 2020

By Mayvelin U. Caraballo, TMT/The Manila Times

A view of the buildings on Roxas Boulevard in Manila from Manila Bay on June 25, 2020.

S&P Global Ratings on Friday trimmed anew its estimate for the country’s gross domestic product (GDP) performance this year as it pointed to government-imposed, growth-disrupting lockdowns as the reason.

“Economic activity has stalled and we expect the economy to shrink 3 percent this year, compared with growth of 6.0 percent in 2019,” the credit ratings agency said in a report.
S&P latest projection is worse than its previous outlook of -0.2 percent. If correct, the forecast would fall within the government’s revised assumption of a 2 to 3.4-percent contraction for 2020.

It it also worse than Fitch Ratings’ -1 percent, the World Bank’s -1.9 percent, Fitch Solutions’ -2 percent, Moody’s Investors Service’s -2 percent, Sun Life Philippines’ -2 to -2.5 percent and ANZ Research’s -2.5 percent; Rizal Commercial Banking Corp.’s -2 to -4 percent and ING Bank Manila’s -2.9 percent.

The new estimate is, however, better than the International Monetary Fund’s -3.6 percent, the Asian Development Bank’s -3.8 percent and Capital Economics’ -6 percent.

“The Philippines imposed [one of] the world’s longest tight lockdowns but new Covid-19 (coronavirus disease 2019) cases remain stubbornly high,” S&P said.

To contain the spread of the coronavirus disease 2019 in the country, the government has
imposed different forms of community quarantine in various areas in the country since March 17, more than two months after the Philippines’ first confirmed case was reported.

“We expect the permanent costs of Covid-19 to be highest in India and the Philippines, due mainly to the severity of [their] lockdowns; and in Thailand, given its high exposure to international travel,” the debt watcher said.

S&P also said the permanent cost — measured as the gap between actual (or forecast) GDP and the pre-recession trend after three years — of the pandemic to the country could reach 4.5 percent.

This compares with the 0.5 to 3-percent range permanent cost for economies that flattened their Covid-19 curves quickly, such as China, South Korea and Taiwan; and those that launched substantial and well-targeted stimulus, such as Australia, Japan, New Zealand and Singapore.

Next year, the credit rater expects domestic output to rebound to 9.4 percent as economic activities resume.

“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.


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