The credit rating and research units of Moody’s Corp. said the risk of another economic recession is rising in the Philippines as the nation struggles with a resurgence of the coronavirus infections that resulted in renewed quarantine measures.
Debt-watcher Moody’s Investors Service and economic think tank Moody’s Analytics said on Monday, March 29, that the government’s new pandemic containment measures will delay the country’s economic recovery, which could take a toll on its credit rating score.
Moody’s said the two-week restrictions previously announced by the government before the reimposition of the seven-day enhanced community quarantine (ECQ) in Metro Manila and adjacent provinces are unlikely to make a major dent on the infection rate.
The credit rating agency also estimated that some of the movement restrictions will likely remain in effect well into the second quarter, which could threaten its forecast for a 7.0 percent rebound in economic growth this year.
Because the Philippines had the deepest contraction in Southeast Asia last year, Moody’s said its inability to contain the spread of coronavirus slows the return of its economic output peak in 2019 at P19.5 trillion.
“Weaker economic growth diminishes prospects for fiscal and debt consolidation,” Moody’s warned.
Likewise, Moody’s said the newly-signed Corporate Recovery and Tax Incentives for Enterprise Act (CREATE) may worsen near-term weakness in the government’s tax revenues.
"In 2020, national government debt rose sharply to 54.5 percent of GDP from 39.6 percent the previous year, effectively reversing the progress on debt consolidation over the past decade,” Moody’s said.
Meanwhile, Moody’s Analytics said in a separate report that recession risk has risen in the country, noting that Filipinos are still far from securing enough vaccine doses to achieve herd immunity, and trailing behind most Southeast Asian nations.
"The current vaccine rollout is evolving at a slow pace, and the country is unlikely to achieve herd immunity until late 2022,” the research firm said.
Moody’s Analytics also said the prospects for improved consumer spending and tourism remain gloomy while employment gains in the upcoming months will be limited due to additional targeted lockdowns and foreign travel bans.
"We maintain our outlook that the Philippines will be one of the worst-performing economies in Southeast Asia, at least for the first half of 2021,” the think tank said.
A delayed recovery will have effects on labor markets that could exacerbate income inequality and poverty in the Philippines, Moody’s said.
“The government's new measures could reverse recovery in the unemployment rate,” Moody’s said.
The number of jobless Filipinos fell to 8.7 percent last October from a peak of 17.6 percent in the second quarter of last year.