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Moody’s downgrades PHL growth forecast

PHILIPPINE STAR/ MICHAEL VARCAS

By Luz Wendy T. Noble, Reporter

MOODY’S Investors Service once again cut its economic growth forecast for the Philippines to 4.8% this year, citing the impact of stricter lockdowns and the sluggish vaccine rollout on recovery.

“Another resurgence in cases led to the reimposition of the enhanced community quarantine (ECQ) in August, weighing on the outlook for growth in the third quarter of 2021 and delaying the normalization of economic activity further,” Moody’s said in a credit opinion sent in response to queries on Thursday.

Moody’s latest estimate is slower than the 5.8% it gave in July, which was also downgraded from the original 6.3% target. It falls within the government’s 4-5% full-year growth target.

Meanwhile, the credit rater slightly raised its 2022 gross domestic product (GDP) growth forecast to 6.8% from 6.5%.

The Philippines continues to battle a surge in coronavirus cases. The Health department reported that active coronavirus infections rose by 21,261 to 177,946 on Thursday.

Aside from the surge in cases, Moody’s said the Philippines’ relatively low vaccination rate has underscored the risks related to the near-term growth outlook.

Latest data from the Johns Hopkins University showed the Philippines has fully vaccinated 16.35% of the population against the coronavirus. However, it is still among the region’s laggards and is faring only better than Indonesia, Vietnam, Taiwan and Myanmar.

The Philippine government hopes to inoculate 70% of its population by end-2021, although this may be affected by delays in the delivery of vaccine supplies.

Meanwhile, Moody’s said the fiscal deficit would likely remain wide and could peak this year.

“The comparatively rapid increase in expenditure is unlikely to rise further given constraints to budget execution and the Duterte administration’s reluctance to consider another fiscal stimulus package following the expiration of the previous package,” it said.

The government projects budget deficit to drop to 7.5% of GDP in 2022 and to 6.3% in 2023.

Moody’s last affirmed its “Baa2” credit rating with a stable outlook for the Philippines in July 2020.

“The stable outlook reflects the view that the recovery from the acute shock posed by the coronavirus pandemic will restore rapid economic growth relative to peers, complemented by the stabilization and eventual reversal of the deterioration in fiscal and debt metrics,” Moody’s said.

In July, Moody’s said the Philippines and other emerging economies such as India and Peru may face “deep scarring” or long-lasting economic losses from the pandemic that will be seen in lower income levels, worsening inequality, and higher poverty incidence.

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