Fitch Solutions slashes Philippines’ economic outlook on COVID concerns

Fitch Solutions on Monday slashed its economic growth outlook on the Philippines, taking into consideration the impact of the coronavirus disease 2019 (COVID-19).

In a commentary sent to reporters, Fitch Solutions said it now expects the Philippine economy to grow by 4.0% this year, down from the 6.0% it earlier forecast.

Should this be realized, it would be the slowest in nearly a decade since the economy grew by 3.9% in 2011.

"We have previously flagged how the Philippines economy would suffer from the COVID-19 outbreak impact through the four channels of tourism, remittances, supply-chain disruption, and foreign direct investment inflows weakening," it said.

"While these transmissions channels are still in place, we now believe that the most significant drag on growth will come from quarantine measures in the country following a severe outbreak," added Fitch Solutions.

From 12:00 a.m. on March 17, the entirety of Luzon was placed on enhanced community quarantine until April 12, 2020, restricting travel within the region in efforts to contain the spread of COVID-19.

"(O)ur outlook for the global economy has become more pessimistic, we now expect a sharper downturn, exacerbated by the tightening of global financing conditions," said Fitch Solutions.

"The combination of these headwinds will cap domestic demand and investment, as well as export activity over the coming quarters," it added.

For its part, the Philippine economic team earlier rolled out a P27.1-billion package to help contain the spread of COVID-19 and to provide economic relief to businesses affected by the threat.

The bulk of the amount, equivalent to P14 billion, will be used for programs of the Department of Tourism (DOT), said to be the "most affected."

"However, we do think that fiscal stimulus will play a large role in supporting the economy and a pipeline of public infrastructure projects will help support a rebound, once the outbreak is contained," said Fitch Solutions.

Just last week, the Monetary Board slashed policy rates by 50 basis points, providing economic stimulus amid the COVID-19 health crisis. — Jon Viktor D. Cabuenas/BM, GMA News