MANILA, Philippines — Debt watcher S&P Global Ratings downgraded its growth outlook on the Philippines, as new lockdowns and the highly contagious Delta variant bring a new threat to the economy.
In a statement Thursday morning, S&P said it now expects gross domestic product to grow 4.3% this year, softer than its previous projection of 6% back in June.
Vincent Conti, senior economist at S&P, said a dangerous combo of floods in parts of the country due to intense monsoon rains and fresh lockdowns to curb a surge in infections “eroded what would have been a highly favorable base effect for the country.”
That said, recovery in 2022 might be shallow and the GDP print would likely be distorted again by base effects. For next year, S&P forecast GDP growth to hit 7.7%, up from its old projection of 7.5%.
"The longer downturn will cause even more economic scarring. By 2025, the Philippines’ GDP will likely be 12% below where it would have been without the pandemic,” Conti said.
Harsh lockdowns were imposed in Metro Manila, Bataan, and Laguna this month as the hyper-contagious Delta variant fuel is said to be fueling a resurgence in cases that’s overwhelming hospitals again. The National Economic and Development Authority projected the economy would bleed P150 billion for every week the capital region would stay under strict measures.
The downgrade was not surprising at all and more institutions and economists are expected to join S&P in tempering their outlook for the economy. No less than President Rodrigo Duterte’s economic managers have turned less upbeat on the economy, with the government now expecting GDP to grow 4-5% this year, abandoning their previous projection of 6-7%.
The government’s growth target for next year was retained at 7-9%. Projections for 2023 and 2024 were unchanged at 6-7%.
According to S&P, the bleaker forecasts on the Philippines reflect a broader “disruption” to growth outlook in Southeast Asia. "A fresh slump in demand in emerging Southeast Asia is hitting sectors that have already faced a challenging year," Vishrut Rana, economist at S&P, said.
"As the pandemic drags on, balance sheets will deteriorate for households, small and midsize enterprises, banks, and the wider economy, leading to more medium-run economic scarring," Rana added.