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Moody’s Sees Steeper Decline of PH Economy

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Key Points

  • Debt watcher Moody’s Investors Service has further downgraded its economic forecast for the Philippines, whose gross domestic product is seen falling by 7 percent in 2020 in the midst of a COVID-19 recession.
  • Moody’s earlier forecasted a 4.5-percent decline of the Philippine economy this year.  But it said it had reduced its outlook in the first half of the year in view of the “deep recession.”
  • In 2020, the government expected GDP contracting by 4.5-6.6 percent.
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Debt watcher Moody’s Investors Service has further downgraded its economic forecast for the Philippines, whose gross domestic product is seen falling by 7 percent in 2020 in the midst of a COVID-19 recession.

Moody’s earlier forecasted a 4.5-percent decline of the Philippine economy this year.  But it said it had reduced its outlook in the first half of the year in view of the “deep recession.”

In the second quarter, the Philippines’ GDP decreased by a staggering 16.5 percent year-on-year—at the height of the region’s longest and most strict COVID-19 lockdown, so the economy shrank by an average of 9 percent in the first six months. In 2020, the government expected GDP contracting by 4.5-6.6 percent.

Moody’s noted that for two weeks in August when COVID-19 infections erupted, Metro Manila and neighboring provinces, which accounted for half the economy, reverted to stricter quarantine measures. Most sections of the country were put under a less strict general community quarantine in September after the two-week span.

The country also recorded a double-digit unemployment rate in the second quarter, while in the same period remittances from overseas Filipinos declined 9.9 percent year-on-year, which Moody’s noted was the first quarterly fall 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.”

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