NCR quarantine seen cutting PH growth to 4.5%

With domestic travel to and from Metro Manila restric­ted to contain the COVID-19 contagion, the Philippines’ economic growth may slow to 4.5 percent this year, London-based Capital Economics said.

As such, Capital Economics senior Asia economist Gareth Leather said they expected the Bangko Sentral ng Pilipinas (BSP) to slash key interest rates by a bigger 50 basis points when its policy-setting Monetary Board tackles the monetary policy stance in a meeting on March 19.

“The new restrictions on economic activity in Manila will further weigh on the country’s outlook and mean the central bank (BSP) will almost certainly cut interest rates again at its meeting on Thursday, if not before,” Capital Economics said in a March 12 report titled “Philippines capital city on ‘lockdown’ over virus fears, rate cuts more likely.”

“From the details that have been published so far, it appears that the lockdown will be far less draconian than the measures that were announced in Wuhan and the rest of China in January. Manufacturing and retail establishments will remain open, public transport will be operational, and people will still be allowed to enter the city for work. As such, many industries, including the important business process outsourcing (BPO) sector should be able to function broadly as normal,” Capital Economics noted.

Finance Secretary Carlos Dominguez III on Thursday night clarified that movement of goods was not covered by the quarantine.

“However, the move is likely to further dent econo­mic sentiment. Consumption, which accounts for around 70 percent of the economy, will take a hit as people avoid public places. Investment plans are also likely to be put on hold. And although the rest of the country will remain open, the restrictions in Manila will deal another major blow to the country’s tourism industry, which generates around 3 percent of GDP [gross domestic product],” Capital Economics added.

Capital Economics said it slashed earlier this week its GDP growth projection for the Philippines to 4.5 percent from 6 percent previously, but locking down Metro Manila “means an even bigger slowdown is now likely.”

The government targets 6.5-7.5 percent growth this year, even as the state planning agency National Econo­mic and Development Authority said the COVID-19 pandemic could cut economic expansion by 0.5-1 percentage point if it would last up to June.