Philippine economy on the cusp of recession, growth now pegged at 0.2% -Fitch Solutions

Fitch Solutions Country Risk and Industry Research on Monday downgraded its outlook on the Philippine economy, noting that the country is now "on the cusp of recession."

In a commentary released to reporters, Fitch Solutions said it now expects full-year growth at 0.5% in 2020, down from the prior forecast of 4.0%.

"Our outlook for the Philippines' economy has become increasingly bearish as the government's extension of lockdown measures and global growth headwinds prove significant drags," the commentary read.

Metro Manila, along with several "high-risk" areas, has been on an enhanced community quarantine since March 17, with the restrictions extended twice until May 15.

"The lockdown will likely bring domestic activity to a near standstill over the two months, with a recovery through Q320 to be slow as containment measures are gradually eased," Fitch Solutions said.

"This comes as the global growth outlook has continued to sour, with the US and China both reporting Q120 growth contractions. As such, we at Fitch Solutions believe the Philippines is on the cusp of recession," it added.

In the same commentary, Fitch Solutions noted that a weak first-quarter growth -- scheduled to be released on Thursday, May 7 -- could push the economic outlook lower to a contraction.

"We also note that the Philippines’ fiscal policy response to the outbreak has been relatively small, at under 2.0% of GDP. Our forecast assumes a more aggressive ramp-up in support as lockdown measures are eased, with a focus on
infrastructure development," said Fitch Solutions.

The government has so far allocated a P1.4-trillion war chest against COVID-19, which the Department of Finance said would be fully available by the end of April.

"Yet, delays in support packages and the implementation of existing investment plans could result in our forecasted government consumption contribution to growth of 1.4pp, being significantly lower," Fitch Solutions said. --KBK, GMA News