Fitch says Philippine economy poised to bounce back but warns vs. delay in vaccine rollout

After a record contraction in 2020, global credit watcher Fitch Ratings expects the Philippine economy to bounce back by as much as 6.9% in 2021, but warned that a delay in the rollout of the COVID-19 vaccines could dampen growth prospects.

In a commentary released on Monday, Fitch said it expects the Philippine economy to have contracted by as much as 8.5% in 2020, given the worse-than-expected impact of the COVID-19 pandemic on private consumption and investment.

The credit watcher said an improvement is expected in the last three months of 2020 following the -10% gross domestic product (GDP) recorded in January to November due to the lockdowns imposed to curb the spread of the virus.

"The economic impact of the COVID-19 shock for the Philippines in 2020 was more significant than we have previously expected due to the domestic infection rate and government policy measures to curb the spread of the virus," it said.

"We estimate full-year GDP to have contracted by 8.5% in 2020, after accounting for an improvement in activity indicators in [the fourth quarter]," it added.

For this year, Fitch expects the Philippine economy to bounce back by as much as 6.9%, and by 8.0% in 2022, citing the decline in new daily recorded COVID-19 cases.

"The authorities have also engaged in multilateral initiatives and with several pharmaceutical companies to secure vaccines, with a rollout expected to start in May 2021. The potential for a delay poses downside risks to our growth forecasts, while an effective vaccine rollout could result in a faster-than-expected recovery in growth," it said.

COVID-19 policy chief implementer and vaccine czar Carlito Galvez Jr. last week said the Philippines targets to vaccinate some 50 to 70 million Filipinos

"We hope to close the deal with these companies this month," he said, as other government officials earlier said the country would have already had the shipment this January if not for Health Secretary Francisco Duque III's alleged failure to submit the necessary documents on time.

In response, Duque had denied this, saying negotiations are still ongoing.

The Philippines has already allocated P73.2 billion for the procurement of the vaccines, with P40 billion coming from multilateral agencies, P20 billion from domestic sources, and P13.2 billion from bilateral agreements.

Meanwhile, the private sector has committed to procure as much as 6 million doses of COVID-19 vaccine from British pharmaceutical firm AstraZeneca, half of which will be donated to the government.

In the same commentary, Fitch maintained the country's long-term foreign-currency issuer default rating (IDR) to "BBB" indicating that the country has "adequate" capacity to repay financial commitments, but this could be impaired by adverse business or economic conditions. —KBK, GMA News