S&P Global Ratings maintained that the Philippine economy is likely to contract by 9.9 percent this year before recuperating in 2021.
In a report released to the media on Tuesday, S&P projected the country’s economic growth would remain unchanged at -9.5 percent in 2020 but would expand by 9.6 percent in the next.
“We keep our GDP (gross domestic product) growth forecast for this year and next unchanged. As before, the base-effect-driven high growth rates for the upcoming years mask the fact that the level of GDP will remain far below the pre-Covid (coronavirus disease 2019) trend even by the end of our forecast horizon,” S&P said.
The credit rating agency said the total number of Covid-19 infections is trending down “at a slow pace,” which it said resulted in “some improvements in the population’s mobility and employment in the past few months.”
“The economy is also gradually improving, but the disruption of a recent typhoon will delay the recovery,” it added.
S&P noted that inflation remains high relative to how much domestic activity has fallen, partly due to the supply-side disruptions from recent typhoons.
“But with growth so low, we continue to pencil in one last rate cut from [the] Bangko Sentral ng Pilipinas after this month’s move, before a long pause,” it said.
Recently, the central bank announced slashing its overnight borrowing, lending and deposit rates by 25 basis points (bps) to 2.00 percent, 1.50 percent, and 2.50 percent, respectively.
S&P also continues to highlight the small fiscal response so far, at about 2.3 percent of GDP.
“We expect a boost from fiscal impulse in the second half of next year if key infrastructure projects start to ramp up again,” it added.