Moody’s says COVID-19 peak, new quarantine restrictions to delay PH recovery
MANILA – Moody’s Investors Service warned on Monday that the recent spike in COVID-19 cases, along with the strict quarantine measures imposed in an attempt to control it, would delay economic recovery.
The rating agency said the new measures “would also weigh on the outlook for fiscal consolidation and exacerbate social risks.”
The government placed the national capital region and four adjacent provinces at the strictest quarantine level for a week from Monday, as new cases of COVID-19 reached more than 9,000 a day. The NCR is the most economically productive region in the country, accounting for a third of the country’s gross domestic product.
“While the current measures are more lenient than the severe lockdowns imposed in 2020, they contrast with the easing of restrictions elsewhere in the region, where infection rates are low or declining,” Moody’s said.
The Debt Watcher also noted that since the two-week restrictions are unlikely to restore infection rates to the best levels of the start of the year, some of the restrictions will likely remain in place until the second quarter. .
Moody’s said this “threatened” its forecast for a 7 percent rebound in real GDP growth in 2021.
Because the Philippines experienced the deepest contraction among ASEAN’s major developing economies last year, its failure to contain the spread of the coronavirus is slowing the return of overall production to its 2019 peak, Moody’s added. .
Nominal GDP in 2020 was 18 trillion pesos, down 7.9 percent from 19.5 trillion pesos in 2019.
The Philippines suffered their worst economic contraction since the end of World War II last year, as the government shut down economic activity and transportation in an attempt to control the spread of COVID-19
Moody’s has warned that the government’s new measures could reverse the recovery in the unemployment rate, which fell to 8.7% in the first quarter from a peak of 17.6% in the second quarter of last year.
The new measures could also reverse the gains in the incidence of poverty, which fell to 16.7% in 2018 from 26.3% in 2009, as the economy grew rapidly during these years. years.
“The government’s 2021 budget projects spending growth of 10%, assuming the economic recovery is firmly entrenched in the second half of the year. Tightening restrictions on households and businesses have prompted calls for another stimulus package as the weak economy weighs on taxable income, ”Moody’s said.
Economic officials have said they expect the GDP growth rate to return to positive territory in the second quarter that the economy has reopened.
However, the recent spike in infections along with the reimposition of strict measures to control the virus have cast doubt on those predictions.
“At the same time, the recently passed Business Recovery and Tax Incentives for Businesses Act (CREATE) could exacerbate the short-term weakness in tax revenues,” Moody’s continued.
The debt watcher said that if CREATE will broaden the tax base in the long run, it could exacerbate the short-term weakness in tax revenues.
“In 2020, the national government debt rose sharply to 54.5% of GDP from 39.6% the previous year, thus reversing the progress of debt consolidation over the past decade,” added the debt watcher.
The Philippine government total debt reached a record 10.3 trillion pesos at the end of January this year.
In July of last year, Moody’s claimed that the country Baa2 Investment grade credit rating indicating that the improvement in the government’s fiscal position in recent years provides a buffer against an increase in public debt due to shocks such as the COVID-19 pandemic.
Moody’s Investors Service, credit rating, debt monitoring, economy, ASEAN, COVID-19 response, CREATE bill, ANC, ANC Top