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Extended lockdown poses risks to Philippine growth outlook
A Fitch Group unit warned that its Philippine economic growth outlook for 2020 is now subject to downside risks because of the extended enhanced community quarantine (ECQ) imposed on Luzon.
“The extension of the lockdown has been a risk we have flagged to the Philippines’ economic outlook,” Michael Langham, Fitch Solutions senior country risk analyst, told The Manila Times.
The government announced on Tuesday that the expanded lockdown that took effect on March 17 and originally scheduled to be lifted at midnight of April 13 would be extended until April 30.
The quarantine was imposed to contain the spread of the coronavirus disease 2019 (Covid 19) in the country. As of Thursday, the number of confirmed Covid-19 cases jumped to 4,076. Of these, 203 died and 124 recovered.
Langham also said a longer lockdown period would mean job losses and business closures becoming increasingly likely, despite the government’s measures.
Ultimately during this period, manufacturing is disrupted, retail sales slump and the service sector goes without income, he added.
“We had flagged how around one in four domestic workers are self-employed, and we see these in particular at risk of struggling to meet debt burdens or scaling back on consumption aggressively,” the Fitch Solutions analyst said.
Because of this, he added, “the economy will suffer further in the near term and we see growing risks to our 4-percent growth forecast (particularly if the lockdown is extended further or to the entire country).”
If correct, the Fitch unit’s estimate it would settle below the 6.5- to 7.5-percent official growth target of the government for this year, and would be the slowest since the 3.7 percent expansion in 2011.
Fitch Solutions’ forecast was also lower than the S&P Global Ratings’ 4.2 percent and ING Bank Manila’s 5.6 percent; but higher than Moody’s Investor Service’s 2.5 percent, the World Bank’s 3 percent, the Asian Development Bank’s 2 percent, ANZ Research’s 1.2 percent, Nomura’s 1.6 percent and the Union Bank of the Philippines’ 0.7- to 2.2-percent range.
Langham also said lower public debt gave the government the ability to spend more for social programs during the extended ECQ.
“With public debt loads relatively low, there is scope for the government to go ahead with its planned spending,” he added.
The government earlier reported that the country’s public debt last year was equivalent to 41.5 percent of gross domestic product, lower than the programmed 41.7 percent and 41.9 percent posted a year ago.
Finance Secretary Carlos Dominguez 3rd has said the government is “very active” in negotiations for total loans of $5.7 billion (over P288 billion) with the Asian Development Bank, World Bank and Asian Infrastructure Investment Bank.
Source: https://www.manilatimes.net/2020/04/11/business/business-top/extended-lockdown-poses-risks-to-philippine-growth-outlook/712319/