March 17, 2020 at 09:30 pm
Julito G. Rada
Global debt watcher Moody’s Investors Service on Tuesday cut the 2020 growth forecast for the Philippines to 5.4 percent from a previous estimate of 6.1 percent amid the supply chain disruptions caused by coronavirus disease 2019.
Moody’s said despite the reduction in growth forecast, the Philippines would remain of the strongest economies in the Asia-Pacific region, next only to the 6-percent estimate both for Vietnam and Laos and 7.6 percent for Bangladesh.
Growth estimates for other Asia-Pacific countries are Japan, 0.0 percent; Korea, 1.4 percent; Australia, 1.6 percent; Taiwan, 1.7 percent; Singapore, -0.2 percent; Hong Kong, -3.5 percent; New Zealand, 1.9 percent; China,4.8 percent; India, 5.3 percent; Indonesia, 4.8 percent; Thailand, 1.8 percent; Malaysia, 3 percent; Pakistan, 2.5 percent; Sri Lanka, 2.5 percent; Macao, -20 percent; Cambodia, 4.5 percent; and Mongolia, 1.8 percent.
Moody’s in February trimmed the gross domestic product growth forecast for the Philippines to 6.1 percent from 6.2 percent.
“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. Risks skewed to the downside,” Moody’s said in a report.
“A number of governments and central banks have announced countervailing measures, including fiscal stimulus packages, policy rate cuts and regulatory forbearance; however, the effectiveness of policy easing will be blunted by measures to contain the outbreak, and policy space is constrained for some sovereigns,” it said.
It said the new baseline assumed a pullback in consumption and ongoing disruption to production and supply chains in the first half of 2020, followed by a recovery in the second half.
“Risks remain firmly to the downside, including from a much weaker European and American economy than currently assumed. Also, rising rates of infection would drive global sentiment even lower, heightening asset price volatility, and tightening financing conditions, which could snowball into deeper economic contraction,” Moody’s said.
“We now assume no growth in Japan and Singapore, and deeper contractions in Hong Kong and Macao in 2020. Forecast revisions also incorporate lower commodity prices, ongoing travel restrictions and heightened containment measures,” Moody’s said.
The government earlier set a 6.5 percent to 7.5 percent growth target for 2020 but the National Economic and Development Authority said last week it was looking at a slower expansion of 5.5 percent to 6.5 percent, taking into account the huge impact to the tourism industry which is one of the pillars of strength of the domestic economy.
An economist on Monday predicted that the Bangko Sentral ng Pilipinas would cut interest rate by at least 50 basis points to counter the impact of COVID-19 and support the economy.
“In light of the Fed move, we expect [BSP Governor Benjamin] Diokno to front load his policy action, and we revise our expectation for Thursday’s meeting for at least a 50 bps rate cut and a possible announcement for additional liquidity via a reduction in reserve requirement or a lowering of the volume for its term deposit facilities,” ING Bank Manila senior economist Nicholas Mapa said.