Fitch Solutions sees Philippine economy falling into recession in 2020

Fitch Solutions Country Risk and Industry Research downgraded further its outlook on the Philippine economy, with the country now widely expected to fall into recession.

In a commentary released to reporters, Fitch Solutions said it now expects full-year growth at -0.2% in 2020, lower than the already downward revised 0.5% outlook earlier in May.

"We at Fitch Solutions expect the Philippines economy to fall into recession in 2020, as the COVID-19 outbreak and resultant containment measures take their toll on economic activity," it said.

The commentary came after the Philippine Statistics Authority (PSA) reported a 0.2% contraction in the first quarter of the year, attributed to the eruption of the Taal Volcano, decline in trade due to COVID-19, and the enhanced community quarantine (ECQ).

"The Q120 reading surprised to the downside, but also signals how deep growth is likely to contract in Q220," said Fitch.

Metro Manila and other "high-risk areas" have been on lockdown since March 17, with the ECQ already having been extended twice to last until May 15.

"The fact both services from a gross value add perspective and household consumption from an expenditure perspective both posted positive growth in Q1, suggests further room for growth to decline in Q2, as consumer spending collapses during the lockdown and all but essential services are restricted from operating," said Fitch Solutions.

"As such, the key driver for our weaker outlook is the belief that the slowdown in domestic activity will be more significant than we had initially anticipated," it added.

For its part, the government has so far allocated a P1.4-trillion budget for efforts against COVID-19. --KBK, GMA News