The Bangko Sentral ng Pilipinas expects the economy to recover next year after a tumultuous 2020 that is being affected by the onslaught of the coronavirus disease 2019.
It said the impact of COVID-19 on domestic economic growth could be seen largely via the services sectors such as tourism, trade and remittances channels.
“In addition, the implementation of the enhanced community quarantine in Luzon could further dampen domestic economic activity,” the BSP said.
“The latest assessment assumes a U-shaped recovery with the impact of COVID-19 lasting until second half 2020 but with the economy expected to rebound by 2021,” it said.
A report by global debt watcher S&P Global Ratings last week said the Philippines would be among the Asia-Pacific countries that would experience capital flight as economic recession was “guaranteed” in this part of the world amid the spread of the disease.
“If lingering uncertainty results in a strong preference for US dollars, policymakers in Asia’s emerging markets may be forced into a damaging round of pro-cyclical policy tightening,” Shaun Roache, the chief Asia-Pacific economist at S&P Global Ratings, said in a regional report.
“The countries most vulnerable to capital outflows remain India, Indonesia, and the Philippines,” Roache said.
Before the onset of COVID-19, the government projected economic growth this year to settle between 6.5 percent and 7.5 percent, driven by higher fiscal spending and investments. The projection was faster than the actual 5.9 percent expansion in 2019 that was slowed down by the delayed approval of the P3.7-trillion national budget.
The National Economic and Development Authority early this month said it was looking at the slower growth this year of 5.5 percent to 6.5 percent, taking into account the impact of COVID-19 to economic growth.
The BSP assured it was prepared to use the “full range” of its monetary instruments and to deploy monetary policy and regulatory relief measures as needed in fulfilment of its price and financial stability objectives.
“In calibrating its monetary policy settings, the BSP will continue to be data-dependent, guided by our inflation outlook over the policy horizon and the risks surrounding such outlook as well as data on demand conditions,” it said.
The Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, on Thursday reduced the policy interest rates by 50 basis points to 3.25 percent to support economic growth this year.