MANILA -- Fitch Solutions slashed its global growth forecast for this year due to the impact of the coronavirus disease 2019 (Covid-19) but retained its outlook for the Philippine economy.
In a report dated February 17, the unit of Fitch Group cut to 2.6 percent its global growth forecast from 2.7 percent previously due to the risk from the impact of the virus, which has spread from China to several other countries.
It earlier projected the recovery of global growth on accounted cyclical factors, but the report said this “is now at risk given the rapid spread of Covid-19.”
While the latest growth forecast figure “still marks a stabilization in growth compared to the rapid deceleration in 2019, from growth of 3.2 percent in 2019, growth risks remains to the downside”, it noted.
Fitch Solutions reduced its 2020 growth projection for China from 5.9 percent to 5.6 percent “with an ensuing knock-on impact on our global growth projections.”
It said more forecast downgrades maybe announced in the coming days vis-à-vis the impact of the virus on the Chinese economy and its influence to other markets.
“The tight trade and investment linkages across Asia have started to result in supply chain issues across the Asian region,” it added.
The report said there could be negative growth spillovers through commodity and tourism channels given that China is one of the largest consumers of commodities and the largest source of tourists for many countries.
While trade-dependent and commodity economies will likely bear the brunt of the slowdown in China, it further said that developed countries with lower linkages, such as the US and in the Eurozone particularly Germany, could also be somewhat impacted, it said.
“As such, we could see our global growth forecasts fall slightly over the coming weeks. The overall impact on growth, however, is still unknown as it will largely depend on how long the Chinese authorities will take to bring the coronavirus outbreak under control,” it said.
Meanwhile, the report showed that Fitch Solutions is currently keeping its 6.3-percent growth forecast for the Philippine economy this year, the 6.0 percent outlook for next year, and the 6.2-percent projection for 2022.
It earlier projected a rebound for the domestic economy this year after the 5.9-percent growth last year.
Growth, as measured by gross domestic product (GDP), fell last year below the government’s 6-6.5 percent target band due to the impact of the delay in the approval of the national budget, which was signed into law only in April.
The delay affected the implementation of programs like the infrastructure projects, which are targeted to further sustain the strong expansion of the domestic economy.
This situation is seen to reverse this year due to the timely approval of this year’s national budget but concerns have been raised on the impact of the virus, which is expected to hit the tourism sector. (PNA)
