FITCH Solutions, the research arm of the Fitch Group, said on Monday it slashed its economic growth forecast for the Philippines as the country continues to struggle in controlling the number of Covid-19 cases.
In a research note, the international think tank said they are cutting the forecast from 7.6 percent down to 5.8 percent, with risks “very much tilted to the downside.”
“We expect the lockdown measures to be extended, given the continued surge in cases and the prolonged impact on hospital capacity,” Fitch Solutions said.
“The likelihood of further outbreaks in other regions remains high, and, given the slow vaccination rollout in the country as less than 1 percent of the population has been vaccinated as of end-March, we believe the Philippines’s recovery will continue to be hampered by the pandemic,” it added.
The Department of Health (DOH) reported on Monday that the country’s total number of cases are now at 803,398 after recording 8,355 new cases during the day.
Presidential spokesperson Harry Roque also announced over the weekend that the country’s capital region—Metro Manila—along with neighboring provinces Bulacan, Laguna, Cavite and Rizal will remain under enhanced community quarantine (ECQ) for at least one more week to control the spread of the virus.
Fitch Solutions said that in the first quarter of the year, there were some signs of gradual recovery in the economy. However, this will “likely be reversed” due to the most recent lockdowns and the rising cases.
“The Philippines economy is highly vulnerable to lockdowns given its high reliance on domestic consumption and investment; and thus growth will likely fall again until lockdown measures are eased,” Fitch Solutions said.
The global think tank also announced revisions on forecasts of private consumption in the country from 5.5 percent to 4.5 percent.
“Our expectation for a modest recovery assumed that domestic demand would gradually recover and the government’s infrastructure plans would come to fruition, resulting in a sharp increase in domestic activity. However, the slow vaccine rollout and recurrent difficulties in containing outbreaks look set to stall the recovery further,” Fitch Solutions said.
As private consumption is expected to slow down, the research firm said growth support for this year will likely stem from a gradual recovery in external demand and remittance flows.
“We believe that overall remittance flows will begin to gradually rebound as growth picks up globally, particularly on the back of a recovery in the US and the Middle East on the back of rising oil prices, which together accounted for 57.4 percent of remittances in 2019,” Fitch Solutions said.
Image credits: Roy Domingo