MANILA – S&P Global is keeping its growth forecasts for the Philippines for this year and 2021, noting the impact of recent typhoons partly hindered chances of economic recovery brought about by improved people’s mobility and employment.
It forecasts a 9.5-percent growth contraction for the domestic economy this year on account of the coronavirus disease 2019 (Covid-19) pandemic, but a 9.6-percent recovery is projected for 2021.
“As before, the base-effect-driven high growth rates for the upcoming years mask the fact that the level of GDP (gross domestic product) will remain far below the pre-Covid trend even by the end of our forecast horizon,” it said in a report dated Nov. 29 released to the media on Monday.
The report cited the progress in domestic economic activity following the easing of movement restrictions.
For one, third-quarter GDP posted a shallower contraction of 11.5 percent from the decades-high -16.9 percent the previous quarter.
However, while economic activities have registered some improvements as quarantine controls are slowly being lifted, the impact of Typhoons Quinta, Rolly and Ulysses, among others, which ravaged several parts of Luzon last October and early November, are considered as setbacks.
Before the weather-related economic hit, Luzon, which accounts for about 70 percent of the country’s GDP, was hurt by the enhanced community quarantine (ECQ) that the government implemented from mid-March until end-April, and was extended to end-May for the National Capital Region (NCR), to address the rise of Covid-19 infections.
Another negative factor is when the quarantine restriction in NCR was reverted from general community quarantine (GCQ) to the stricter modified ECQ for 15 days last August to help the medical sector address the rising Covid-19 cases.
Meanwhile, the report said economic activities slowed but inflation rate accelerated on typhoon-induced supply disruption, although still within the government’s 2 to 4-percent target for 2020-2022.
Inflation last October rose to 2.5 percent from the previous month’s 2.3 percent.
The Bangko Sentral ng Pilipinas (BSP) forecasts the November 2020 inflation to stay within a range of between 2.4 to 3.2 percent.
As of last October, inflation averaged at 2.5 percent, which monetary authorities cited as among the factors for the leeway in their decision to slash key policy rates.
To date, the BSP’s policy-making Monetary Board (MB) has cut the central bank’s key rates by a total of 200 basis points.
The S&P report forecasts another rate reduction during the Board’s meeting next month “before a long pause.”
“We continue to highlight the small fiscal response so far, at about 2.3 percent of GDP. We expect a boost from fiscal impulse in the second half of next year if key infrastructure projects start to ramp up again,” it added. (PNA)
