Delayed recovery to slash Philippine GDP growth to 7.1%

MANILA, Philippines — Sporadic COVID-19 outbreaks in Southeast Asia are threatening to delay recoveries and could slash the projected gross domestic product (GDP) growth of the Philippines to 7.1 percent instead of 9.6 percent this year, according to S&P Global Ratings.

In a report, the debt watcher said the major emerging markets in the region led by the Philippines, Indonesia, Malaysia, and Thailand are living with the effects of new COVID-19 waves that only recently look to have peaked.

It said the recent outbreaks could prolong the paths to recovery instead of the baseline estimate that emerging Southeast Asia may return to its pre-pandemic level by August.

“Southeast Asia has been struggling with sporadic outbreaks of COVID-19,” the rating agency said.

S&P said a six-month delay in the recovery could result in lower GDP growth of 4.4 percent instead of 6.2 percent for Southeast Asia.

The Philippines, however, would still emerge as the fastest growing economy versus the projected growth rates of 5.7 percent for Malaysia, 3.8 percent for Indonesia and 3.2 percent for Thailand.

“Coming into 2021, activity in Southeast Asia’s big four emerging markets was between two and eight percent below pre-pandemic levels. Bear in mind that these economies usually grow quickly so this implies very large gaps between where these economies were and where they would have been in the absence of COVID,” S&P said.

The Philippines recorded a 9.5 percent GDP contraction last year, ending 22 straight years of positive growth after the government imposed the longest and strictest lockdowns in the world.

The debt watcher said a weak first quarter performance would shave about one percentage point to the GDP of Southeast Asia to 5.2 percent instead of the baseline growth forecast of 6.2 percent.

“A two-month delay would reduce our Southeast Asia growth estimate by one percentage point in 2021, to 5.2 percent, and further delays would lead to higher permanent economic losses,” it said.

A two-month delay would slash the GDP growth forecast of the Philippines to 7.7 percent and a four-month delay to 7.4 percent versus the baseline growth forecast of 9.6 percent.

S&P’s base case still assumes vaccines should be widely distributed by the second half, ushering in robust activity.

“Emerging economies in Southeast Asia have secured enough vaccine doses for 40 to 50 percent of their populations on average, although the efficacy of the vaccines and timing of distribution remain unclear. We still assume a broad vaccine rollout will be in place by the second half of 2021,” it said.