THE economy’s recovery will be hindered by the series of typhoons that hit during the fourth quarter, with fiscal and monetary measures necessary to provide support, S&P Global Ratings said.

“The economy is gradually improving, but the disruption of a recent typhoon will delay the recovery,” S&P said in a note on Monday.

Crop damage from typhoons Rolly and Ulysses (international names: Goni and Vamco) were tallied at P5.79 billion and P6.72 billion, respectively, by the Department of Agriculture.

S&P Global Ratings maintained its gross domestic product (GDP) estimate of minus 9.5% and 9.6% for 2020 and 2021, respectively, issued in September. This compares to the minus 4.5% to minus 6.6% forecast range given by the government for this year and a growth estimate of 6.5% to 7.5% for 2021.

S&P’s 2020 GDP forecast for the Philippines is the worst among the economies it tracks in the Asia Pacific. Its estimate for Thailand is minus 6.4%, Singapore minus 6.1%, and Hong Kong minus 5.8%.

“As before, the base-effect-driven high growth rates for the upcoming years mask the fact that the level of GDP will remain far below the pre-COVID trend even by the end of our forecast horizon,” S&P said.

The economy contracted by 11.5% in the three months to September, following the record 16.9% decline in the three months to June period. The third quarter was the third straight GDP contraction.

S&P expects inflation this year to average 2.8%, higher than the 2.4% forecast of the central bank. Year-to-date, the consumer price index rose 2.5% as of the end of October.

“Inflation remains high relative to how much domestic activity has fallen, in part due to the supply-side disruptions from recent typhoons,” it said.

“But with growth so low, we continue to pencil in one last rate cut from the Bangko Sentral ng Pilipinas (BSP) after [last] month’s [November] move, before a long pause,” it added.

The overnight reverse repurchase, lending, and deposit facility are currently at record lows of 2%, 2.5%, and 1.5%, respectively, after a 25 basis points (bps) cut in November. The central bank has slashed 200 bps from benchmark rates so far this year to provide support to the economy and has assured that it will remain accommodative if the need arises.

Meanwhile, S&P said the Philippines’ fiscal response to the crisis remains small.

“We expect a boost from fiscal impulse in the second half of next year if key infrastructure projects start to ramp up again,” it added.

The 2021 budget worth P4.5 trillion remains pending in Congress and legislators have committed to passing it by Dec. 16, in time for signing before the year ends. — Luz Wendy T. Noble

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