MOODY’S ANALYTICS downgraded its growth outlook for the Philippines for 2021 to 6.2% from its 7.8% estimate issued last month, citing the government’s tepid fiscal response which may result in a recovery weaker than it could have been.

“The 2021 forecast has been revised downward because there has been a smaller fiscal policy response than we had previously assumed,” Steve Cochrane, chief Asia-Pacific economist at Moody’s Analytics, said in an e-mail Monday.

Republic Act (RA) No. 11494 or the Bayanihan to Recover as One Act (Bayanihan II) allocated an additional P165 billion for the country’s pandemic response. It followed the P275 billion provided by RA 11469 or Bayanihan I to address the economic crisis. In total, the government’s fiscal response is equivalent to about 3.9% of gross domestic product (GDP), according to a policy tracker maintained by the International Monetary Fund.

Meanwhile, Moody’s Analytics upgraded its 2020 GDP outlook to minus 8.2%, against the earlier forecast of minus 9.2%, citing some improvements seen in manufacturing and trade.

“Manufacturing is rebounding a little better than expected. Further, exports, which had been following an uncertain path, improved quite a bit in September, and with trade picking up globally and in Southeast Asia, trade should add some support to economic growth,” Mr. Cochrane said.

The Monthly Integrated Survey of Selected Industries reported that factory output, as measured by the Volume of Production Index, contracted by 8.4% year on year in September, according to the Philippine Statistics Authority (PSA). This represented an improvement from the decline of 9% in August.

Merchandise exports rose 2.2% to $6.22 billion in September following a 12.8% year-on-year drop in August, the PSA said. This is the first month of expansion in exports since the 2.8% seen in February, before the coronavirus disease 2019 (COVID-19) outbreak became a pandemic.

In the third quarter, Moody’s Analytics said GDP likely contracted 6%, a less drastic decline than the minus 9.2% median estimate from a BusinessWorld poll of 19 economists last week. In the second quarter, which included the weeks when the lockdown was at its most strict, the contraction was a record 16.5%.

Mr. Cochrane said the easing restrictions will pave the way for the economy to gradually pick up.

“We should be able to characterize the economy as beginning its recovery some time in the third quarter, perhaps in late August. So far, the fourth quarter looks like it is continuing the recovery, and 2021 will look better as well.”

The government expects the economy to contract between 4.5% and 6.6% before bouncing back with growth of 6.5% to 7.5% next year.

The PSA will report third-quarter GDP data on Tuesday, Nov. 10. — Luz Wendy T. Noble