Moody’s lowers 2020 growth forecast for PH

Debt watcher Moody’s Investors Service slashed its 2020 growth forecasts for the Philippines, China and some other countries in Asia-Pacific as the COVID-19 outbreak posed a risk to economic expansion in the region.

In a report titled “Sovereigns—Asia-Pacific: Regional growth update following coronavirus outbreak” released Tuesday, Moody’s cut its 2020 gross domestic product (GDP) growth projection for the Philippines to 6.1 percent from 6.2 percent previously.

Supply disruption

The revised GDP growth forecast for the Philippines remains faster than the eight-year low expansion of 5.9 percent last year, although further below the government’s target of 6.5-7.5 percent for 2020.

Similar to most of its neighbors, the Philippine economy will take a hit given that China is its biggest trading partner and second-largest source of foreign tourists.

Data from Moody’s and the United Nations Conference on Trade and Development showed that about a fourth of the Philippines’ goods exports in 2018 were 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 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 at the start of the year, unlike last year’s late approval.

‘Knock-on effect’

In the case of China—where COVID-19 originated and is still spreading—Moody’s reduced its growth forecast for this year to 5.2 percent from 5.8 percent previously, “reflecting a severe but short-lived economic impact, with knock-on effects for economies across the region,” Moody’s senior vice president Christian de Guzman said in a statement.

Based on Moody’s projections, a one-percentage point reduction in China’s real GDP growth will result in an almost 0.1 percentage point 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. This shock comes on the back of a marked slowdown in 2019 as decelerating global trade hit the region,” Moody’s said.

“Reduced Chinese demand for Asia’s exports and supply chain disruptions represent the two most direct transmission channels for slowing economic growth, although services trade adds a third channel. As such, goods and commodity exporters are most exposed to a protracted fall in Chinese demand, while tourism hubs that rely on Chinese visitors will also be vulnerable,” Moody’s added.

Moody’s said that outside China, its special administrative regions Hong Kong and Macau would be most badly hit by the economic fallout due to COVID-19 as they were closely integrated with the mainland’s economy. INQ