S&P cuts Philippines growth forecast to 4.2%

MANILA, Philippines — S&P Global Ratings further slashed its 2020 economic growth forecast for the Philippines to 4.2 percent from the original target of 5.8 percent amid the uncertainty brought about by the coronavirus disease 2019 or COVID-19 outbreak.

This is the third time S&P has lowered its economic growth forecast for the Philippines.

In a report, S&P has raised the total and permanent income loss in the Asia Pacific, including the Philippines, to approximately $620 billion from the previous estimate of $211 billion.

The country’s economic growth declined to 5.9 percent last year from 6.2 percent in 2018 and missed the  government target of six to 6.5 percent.

For 2020, government economists expect the economy to expand by 6.5 to 7.5 percent.

However, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno earlier said the COVID-19 pandemic could bring down the country’s economic growth to about five percent this year.

However, despite the expected economic slowdown, the Philippines is expected to be the second fastest growing economy in Southeast Asia after Vietnam’s five percent. Indonesia is seen growing by 4.1 percent, followed by Malaysia’s 2.7 percent, Taiwan’s 1.6 percent, and Thailand’s 0.5 percent

For Asia Pacific, S&P lowered the region’s  growth forecast anew to 2.7 percent this year. It further slashed the growth projection for China to 2.9 percent, while the economies of Hong Kong, Japan, Singapore and South Korea are also expected to contract this year.

“S&P Global Ratings acknowledges a high degree of uncertainty about the rate of spread and peak of the COVID-19 outbreak. Some government authorities estimate the pandemic will peak in June or August, and we are using this assumption in assessing the economic and credit implications,” it said.

The rating agency sees a sharp recovery in GDP growth to 7.5 percent in 2021 before stabilizing at 6.7 percent in 2022 and 6.6 percent n 2023.

In terms of inflation, the debt watcher said the consumer price index of the Philippines would settle at 1.6 percent this year, lower than the BSP target of two to four percent, from 2.5 percent last year amid the sharp drop in global oil prices as well as fairly stable food prices.