The Philippines may face “deep scarring” or long-lasting economic losses due to the prolonged pandemic, Moody’s Investors Service said on Friday.
“Many have been challenged to contain the pandemic, such as Peru, the Philippines and India, heightening uncertainties around the effective reopening of their economies amid new waves of the virus since the start of the year,” it said in a note.
Coronavirus disease 2019 (COVID-19) infections on Friday rose by 6,845 to bring the active cases to 55,069, the Health department reported.
In an attempt to curb the spread of the more transmissible Delta variant, President Rodrigo R. Duterte placed the National Capital Region under a general community quarantine (GCQ) with heightened restrictions until July 31.
In a separate note also released Friday, Moody’s warned that emerging markets with low vaccination rates are the most vulnerable given the possibility of renewed infection surges.
Data from the Johns Hopkins University showed that vaccine doses administered in the Philippines reached 15.616 million, although only 5.031 million have received two jabs. This means only 4.65% of the population has been fully vaccinated against COVID-19 so far.
The government eyes to vaccinate as many as 70 million Filipinos by end-November, focusing on risky areas where infections are relatively higher.
Moody’s said that the degree of scarring and the recovery will be dependent on a country’s economic structure and the adaptability of its labor and goods market. It stressed the quality of policy response and vaccination pace will also be crucial.
“Economic scarring from the COVID-19 crisis will compound underlying challenges related to fiscal consolidation and the reversal of debt accumulation. It will lower income levels, exacerbate inequality, and increase poverty,” the ratings agency said.
“Well-targeted fiscal stimulus that supports viable companies and employment is more likely to allow recipient economies to emerge from the pandemic without significant economic scarring,” it added.
Government officials on Monday kept its budget ceiling for 2021 at 9.3% of the gross domestic product (GDP, but lowered its threshold to 5.9% (from 6.4%) in 2023 and 4.9% (from 5.4%) for the next three years, reflecting their stance to keep fiscal prudence during the crisis.
Moody’s on Wednesday lowered its Philippine growth forecast this year to 5.8% from the 7% it gave in January. The latest estimate is also lower than the 6-7% target growth by the government.
Most economies will be hit by scarring in different degrees, the ratings agency said. This will be reflected through output loss which will likely be regained beyond 2023.
Other countries that are also expected to have “deep scarring” include tourism-driven economies such as Bahamas, Barbados, Belize, Mauritius, and Montenegro and lower-income countries like Bangladesh, Uganda, and Tanzania, among others.
Meanwhile, it noted that Asian economies such as China, Singapore, and Korea where the initial response to the virus has been relatively effective and have new strategies geared towards adjusting to a post-pandemic world face limited risks of long-term scarring.
Moody’s affirmed its “Baa2” with a “stable” outlook for the Philippines in July last year. In March this year, it warned that the infection spike is “credit negative” to the country’s rating and may hinder economic recovery. — Luz Wendy T. Noble