Moody’s cuts anew 2020 PH growth forecast to 5.4% due to pandemic

As the COVID-19 disease turned pandemic, 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, contained in its Asia-Pacific report released Tuesday and titled “Regional credit outlook update on evolving coronavirus impact,” was lower than the downscaled 6.1 percent in February, which had also been attributed to the impact of the COVID-19 outbreak during that month.

As such, the debt watcher’s forecast slid below not only the government’s target range of 6.5-7.5 percent, but also last year’s eight-year low expansion of 5.9 percent.

Its newest growth projections for the Philippines and across the region had a baseline assuming “declining consumption levels and continuing disruptions to production and supply chains in the first half of 2020, followed by a recovery in the second half of the year,” Moody’s senior vice president Christian de Guzman said in a statement.

“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,” De Guzman said.

“Rising infection rates would further impede global sentiment, heightening asset price volatility and tightening financing conditions, which could snowball into a deeper economic contraction,” he added.

“A number of governments have already announced measures to cope with the impact of the coronavirus and Moody’s expects there will be more fiscal stimulus as the extent of the economic fallout becomes clearer. However, some governments—mainly frontier markets—may be constrained by their high indebtedness and limited access to funding,” according to De Guzman.

Moody’s data nonetheless showed that the Philippines faced 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,” with the risk tilted to the downside.—Ben O. de Vera INQ