As the COVID-19 disease wreaks havoc on markets worldwide, debt watcher Moody’s Investors Service again cut its 2020 growth forecast for the Philippines to 5.4 percent.
Moody’s updated gross domestic product (GDP) growth projection was lower than the 6.1 percent projection last February, a figure already downscaled as a result of COVID-19. The new projection was in Moody’s Asia-Pacific Report released on Tuesday (March 17).
The new forecast slid under not only the government’s 6.5 to 7.5 percent target but also 2019’s eight-year low growth of 5.9 percent.
The new growth projections for the Philippines and the rest of the region assumed “declining consumption levels and continuing disruptions to production and supply chains” and recovery by the second half of 2020.
“In the short run, this is playing out as both negative supply and demand shocks, and the longer the disruptions last, the greater the risk of a global recession,” said Christian de Guzman, Moody’s senior vice president, in a statement.
“Rising infection rates would further impede global sentiment, heightening asset price volatility and tightening financing conditions,” he said.
These, he added, “could snowball into a deeper economic contraction.”
While a number of governments had already taken steps to cope and fiscal stimulus was likely to follow, some governments “may be constrained by their high indebtedness and limited access to funding.”
Moody’s data showed that the Philippines faced among the least external pressures using an external vulnerability indicator—a ratio of combined short-term external debt, currently maturing long-term debt, and total nonresident deposits over one year against official foreign exchange reserves.
Data showed that the Philippines’ general government foreign currency debt as a share of gross debt stood below 40 percent in 2019.
Across Asia-Pacific, Moody’s said “dampening of domestic consumption demand in affected countries exacerbates disruptions to supply chains and cross-border trade of goods and services.”
“The longer the disruptions last, the greater the risk of global recession becomes,” it said.