MOODY’S Investors’ Service has cut its growth forecast for the Philippines while also trimming its outlook for some Asian countries as some sectors are expected to take a hit due to the coronavirus disease 2019 (COVID-19) outbreak.
The debt watcher reduced its 2020 gross domestic product (GDP) growth forecast for the Philippines to 6.1% from the 6.2% it gave last year, which it had affirmed in a research note last month.
“The reduction in the Philippine forecast reflects our view of spillovers from slower growth in the rest of the region, primarily the large impact of the COVID-19 outbreak in China,” Moody’s Senior Vice-President Christian de Guzman said in an e-mail.
“Nevertheless, the forecast has been maintained at a relatively high level because of our baseline expectation that much of the economic impact will be limited to the first quarter and that normalization of activity will resume later in the second quarter,” Mr. De Guzman said.
The Philippine economy grew 5.9% in 2019, slower than the 6.2% print the prior year and missing the downward-revised 6%-6.5% target of the government.
The government set a target range of 6.5%-7.5% economic growth this year.
Economic managers have said they see minimal economic impact from the virus, but this will also depend on how long the outbreak will persist. Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno has said the outbreak could dent the economic growth in the first half by an average of 0.3%.
Meanwhile, the National Economic and Development Authority said the economic impact could further rise to as much as 0.7% of GDP if the virus lingers until December, based on a scenario where inbound Chinese tourists will be cut by 100% and foreign tourists coming in will be reduced by 10% from the baseline during the given period.
Moody’s said they see a disruption in economic activity in the first quarter due to the virus, but the impact to growth will depend on countries’ exposure to China.
In the report, it trimmed its 2020 GDP growth forecast for China to 5.2% from 5.8%. It likewise lowered its projections for other countries within the region, including Thailand at 2.3% (from 3.1%) and Vietnam at 6.4% (from 6.7%).
“We have flagged that the downside risks to the regional economies will be more severe should the outbreak grow to pandemic levels,” Mr. De Guzman said.
He, however, said the Philippines’ growth will be supported by base effects, with spending seen to spike after being a laggard to expansion last year.
“The Philippines will benefit from ‘base effects’ from a ramp-up in government spending this year as compared to last year, which was negatively affected by the four-month delay in the passing of the budget,” he said.
In its report, Moody’s said a prolonged duration of the COVID-19 outbreak will result in “significant second-round effects,” which may include severe supply chain disruptions.
It added that tourism hubs relying mainly on Chinese visitors, which are predominantly in the Asia-Pacific, will be heavily hit by the outbreak’s impact. — Luz Wendy T. Noble