THE recovery of the local economy remains at risk, according to two international think tanks, as the Covid-19 Delta variant continues to pose a threat in the Philippines’s pandemic response.
In two separate research notes, Moody’s Analytics and Fitch Solutions said the recent surge in Covid-19 cases in the country, as well as the entire Asia-Pacific region, is an emerging threat to economic recovery and a challenge to policy effectiveness.
Moody’s Analytics, the research arm of Moody’s Group, particularly said the Philippines—along with Indonesia—will struggle most with less effective Covid-19 policies due to vaccine shortages and ineffective social distancing measures. This, the think tank said, creates much uncertainty on the timing of a rebound.
“Economies in the region, including the Philippines, India, Malaysia, Singapore, Hong Kong and even Taiwan, have seen single-quarter gross domestic product [GDP] declines in the first or second quarter of this year, or the data has been significantly revised down from first estimation,” Moody’s Analytics said.
“The Philippines, Malaysia, Singapore and Hong Kong have been the most volatile; each experienced a quarter-to-quarter decline of GDP in the second quarter of this year. And in all of these but the Philippines, the decline followed robust double-digit percent growth in the first quarter on a seasonally adjusted annualized rate basis,” it added.
In a separate research note, Fitch Solutions announced that they have revised their growth forecast of emerging Asia downward from 7.9 percent to 7.8 percent, saying the region’s recovery has been constrained by low Covid-19 vaccination rates and the emergence of the more transmissible Delta virus variant.
“Risks to growth have risen due to the emergence of the more transmissible Delta variant, which has caused several markets to implement renewed lockdown measures and significantly postpone border reopenings.
As a result, over the past quarter, we have made several downward adjustments to our growth forecasts for 2021 with markets like Indonesia, Thailand and the Philippines seeing the largest revisions amid their significantly worse outbreaks since the onset of the pandemic and relatively low vaccination rates,” Fitch Solutions said.
Earlier this month, Fitch Solutions slashed its growth forecast of the Philippines from 5.3 percent to 4.2 percent. The new projection came amid the Philippine Statistics Authority’s (PSA) announcement that the country’s gross domestic product in the second quarter of the year hit 11.8 percent, effectively ending the recession in the country.
The think tank said continued outbreak risks will hold back the possibility of Asian economies normalizing activity and reopening their markets in a “meaningful way” in 2021.
The think tank noted that Asia not only has the highest levels of movement restrictions and stringent policies to control the virus transmission, it also still has the largest number of border closures across the world, with 70 percent of the region’s borders still closed.
Image courtesy of Nonie Reyes