Debt watcher Moody’s Investors Service (Moody’s) slashed its 2020 growth forecasts for the Philippines, China and other countries in Asia-Pacific as the COVID-19 outbreak continued to threaten economic expansion in the region.
In a report titled “Sovereigns – Asia Pacific: Regional growth update following coronavirus outbreak” released on Tuesday (Feb. 18), Moody’s cut its 2020 gross domestic product (GDP) growth projection for the Philippines to 6.1 percent from 6.2 percent previously.
The revised GDP growth forecast for the Philippines remained faster, though, than the eight-year low expansion of 5.9 percent last year. It was, however, below the government’s 6.5-7.5 percent target for 2020.
Like most of its neighbors’, the Philippine economy was seen to take a hit since China is its biggest trading partner and second largest source of foreign tourists.
Moody’s and United Nations Conference on Trade and Development (Unctad) data showed that about one-fourth of the Philippines’ goods exports in 2018 had been shipped to China.
Also, travel and tourism had contributed almost 10 percent to the Philippines’ GDP, with Chinese tourists accounting for nearly 20 percent of total arrivals, Moody’s and World Travel and Tourism Council (WTTC) data showed.
Prior to the COVID-19 outbreak, Moody’s was bullish about faster Philippine growth this year as the P4.1-trillion 2020 national budget was passed and implemented without delay unlike 2019’s spending package.
In the case of China—where COVID-19 originated and was still spreading—Moody’s reduced its growth forecast for this year to 5.2 percent from 5.8 percent previously.
The projection for China reflected “a severe but short-lived economic impact with knock-on effects for economies across the region,” said Christian de Guzman, Moody’s senior vice president, in a statement.
According to Moody’s a 1 percentage point (ppt) reduction in China’s real GDP growth will result in a nearly 0.1 ppt decline in the Philippines’ GDP.
“The coronavirus outbreak adds to other pressures on growth in Asia-Pacific, with the impact felt primarily through trade and tourism, and for some sectors also through supply-chain disruptions,” Moody’s said.
“This shock comes on the back of a marked slowdown in 2019 as decelerating global trade hit the region,” Moody’s added.
It said reduced Chinese demand for Asian exports and “supply chain disruptions” were the two “most direct transmission channels for slowing economic growth.”
Services trade, Moody’s said, “adds a third channel.”
Goods and commodity exporters in the region “are most exposed to a protracted fall in Chinese demand,” it said.
“Tourism hubs that rely on Chinese visitors will also be vulnerable,” Moody’s said.
Outside China, special administrative regions like Hong Kong and Macau are to be badly hit by economic fallout from COVID-19 as these are integrated with the mainland’s economy, added Moody’s.