Debt watcher Moody’s Investors Service has further downgraded its economic outlook for the Philippines, whose gross domestic product (GDP) is seen sliding by 7 percent in 2020 amid a COVID-19-induced recession.
Moody’s earlier projected a 4.5-percent contraction of the Philippine economy this year. However, it said it had lowered its projection in view of the “deep recession” in the first half of the year.
The Philippines’ GDP fell by a record 16.5 percent year-on-year in the second quarter—at the height of the longest and most stringent COVID-19 lockdown in the region, such that the economy shrank by an average of 9 percent in the first six months. The government had projected GDP to contract by 4.5-6.6 percent in 2020.
Moody’s noted that Metro Manila and neighboring provinces, which accounted for half of the economy, reverted to stricter quarantine measures for two weeks in August when COVID-19 infections surged. After the two-week period, most parts of the country were placed under a less stringent general community quarantine in September.
In the second quarter, the country also recorded a double-digit unemployment rate, while remittances from overseas Filipinos declined 9.9 percent year-on-year in the same period, which Moody’s noted was the first quarterly drop since 2015.
“The plunge in manufacturing production, in terms of value and volume, was due to disruptions to operations as the rebound in May and June from the trough reached in April mirrored developments related to the tightening and relaxation of pandemic curtailment measures. At the same time, ongoing restrictions on domestic and cross-border travel have hampered tourism and related industries with foreign visitor arrivals,” Moody’s added.
“Our projection of an economic recovery in the second half—while still intact—will be less robust than previously assumed. Combining this view with the sharp contraction in the first six months of 2020, we have lowered our full-year real GDP forecast to a contraction of 7 percent,” Moody’s said.
On the “Bayanihan 2” bill, Moody’s said the P165-billion stimulus, “will have limited impact on the budgetary envelope as it will be funded largely through off-budget government savings and reallocation of parts of the previously national budget.”