FITCH Solutions warned on Thursday that the Philippines may be facing another cut in its growth forecast should Covid-19 cases continue to be uncontrolled in the coming months.
In a research note published on Wednesday, the international think tank warned of further cuts in its growth forecast and changes in their monetary policy projection if cases continue to be elevated in the country.
“We will be watching the Philippines’ Covid-19 containment efforts and vaccination programme. If the country continues to struggle with the outbreak we could revise our economic growth outlook lower and with it, our outlook for policy hikes in 2022,” Fitch Solutions said.
The think tank, which is the research arm of the Fitch Group, has already revised the country’s growth forecast twice this year, due largely to worse than expected control of the virus.
The second cut was made just this week, revising its forecast down to 5.3 percent from the earlier 5.8 percent.
On Thursday, the Department of Health (DOH) reported 6,385 new cases, bringing the country’s total number of Covid positive cases at 1,124,724.
Fitch Solutions also said there are downside risks to their forecast of three 25 basis point rate hikes in 2022, given the country’s “continued struggles with managing the Covid-19 pandemic.”
“The surge in new Covid-19 cases and the lockdown measures implemented since late-March and through to May will weigh substantially on domestic demand and threaten the longer-term outlook for the economy, given lost income, prolonged business disruptions and unemployment,” Fitch Solutions said.
“We highlight weak credit growth as a signal that monetary policy may need to remain accommodative over an extended period of time,” it added.
The think tank also said that if the weak credit data continues through 2021, monetary policy conditions may have to be eased further.
Just this week, the think tank already said the renewed lockdowns to curb this will weigh substantially on economic activity in the second quarter of the year and that the retightening of travel, movement and operation in key cities in the country proves that it is “highly unlikely” that the economy will improve in the next quarter.
“We at Fitch Solutions believe the Philippines economy will continue to struggle amid its difficulties controlling the spread of Covid-19 and normalizing economic activity. The Philippines has been battling a rampant third wave of Covid-19 cases, which looks set to delay the economic recovery further,” the think tank said in a research note published on Wednesday.
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