THE economic recovery in the Philippines will likely remain slower than most of Southeast Asia this year with the rising coronavirus case count expected to result in extended lockdowns to relieve pressure on the healthcare system, Fitch Solutions Country Risk and Industry Research said.
Fitch Solutions, the research unit of credit rating agency Fitch Ratings, reduced its growth forecast for the Philippines this year to 5.8% from the 7.6% issued in January.
The estimate is lower than the 6.5-7.5% target set by the government’s economic managers last year.
Anwita Basu, head of Fitch Solutions’ country risk division for the Asia Pacific, said the Philippines and Thailand “are likely to remain laggards in the region in terms of growth” in 2021.
“In the Philippines, we expect the lockdown measures to be extended given the continued surge in cases and prolonged impact on hospital capacity. The likelihood of further outbreaks in other regions also remains high given the slow vaccination rollout in the country,” Ms. Basu said at a webinar Thursday.
“As such, we believe the Philippines’ recovery prospects are likely to be hampered by the pandemic throughout the year,” she added.
The economy contracted by 9.6% in 2020 after the government enforced one of the world’s longest and strictest lockdowns.
The Health department reported 9,216 new coronavirus cases Thursday, bringing the tally to 828,366. There were 60 new deaths recorded bringing the total to 14,119.
Michael Langham, a senior country risk analyst at Fitch Solutions, said stringent lockdowns are damaging to the economy because they dampen domestic consumption and investment.
“The minute you disrupt that, you see growth drop quite sharply,” he said.
He added that Fitch Solutions is still expecting the Philippines to post a partial rebound for the year since both the public and private sectors have adjusted to the restrictions and operations are likely to recover to a greater extent than last year.
“As the external backdrop is picking up, exports will rebound as well as remittances, helping support household incomes during this crisis,” he said.
Upside risks to the outlook are the supportive stance of monetary and fiscal policy throughout the year, as well as the vaccination rollout. He said the wider availability of vaccines will improve business sentiment and eventually help credit growth and investment pick up gradually.
Mr. Langham said Fitch does not expect lockdown restrictions to be enforced throughout the year, but a full recovery from 2020 is only expected in late 2022. — Beatrice M. Laforga