The ongoing coronavirus pandemic is dampening the expansion of power generation capacity in the Philippines as government response to the crisis draws away funds from projects that would boost electricity demand, according to Fitch Solutions.
Fitch Solutions noted in an industry commentary that the Philippine government was facing increasingly tighter financial constraints as the pandemic dragged on.
“This will see more funds channeled away from infrastructure spending toward other immediate concerns such as supporting the labor market and households through handouts and wage subsidies,” the group said.
“The inability to contain the virus could also dampen foreign direct investments and momentum around structural reforms to attract such investment over the longer term,” it added. “Projects that are currently in its construction phases are also likely to face delays due to labor and supply chain disruptions from ongoing restrictions.”
Considering these factors, Fitch Solutions has taken back its earlier forecast of a recovery for the domestic power sector in the latter half of this year.
“As the market continues to struggle to contain the virus, we have seen renewed lockdowns across several cities, and our initial expectation for a [second semester 2020] recovery is now unlikely,” the group said.
Fitch Solutions expects the recession to push down heavily on electricity demand and, thus, also on power generation.
“We now expect power consumption to contract by 5.9 percent in 2020, with further downside risks,” the group said.
Even then, Fitch Solutions has penciled in a vigorous recovery in the power sector after the pandemic, which will be driven by macroeconomic and population growth as well as the government’s drive to make electricity services accessible to all households by 2020.
But “we remain cautious on project realization and other delays, particularly as its business environment has deteriorated in recent years,” Fitch Solutions said.