‘Fast Covid cases rise, slow vaccination put PHL at risk’

INTERNATIONAL economists are sounding the alarm on the Philippine economy, saying the renewed spikes in the country’s coronavirus cases, coupled with the slow vaccination progress, will have adverse effects on the local economy.

In its Asia-pacific assessment on economic recovery in the region as published on Monday, Moody’s Analytics - the research arm of Moody’s Group - said the Philippines “stands out as the laggard” in the region as it faces a surge of new infections and fresh lockdown measures.

Meanwhile, in Japan and South Korea, conditions are generally better as transport activities have improved on the back of falling numbers of Covid-19 cases.

“The Philippines will be one of the worst-performing economies in Southeast Asia, at least for the first half of 2021. The country’s target of inoculating most of its population this year will play a pivotal role in the recovery of the consumption-driven economy,” Moody’s Analytics economist Dave Chia said.

“However, the current vaccine rollout is evolving at a slow pace, and the country is unlikely to achieve herd immunity until late 2022,” he added.

The Philippines’s inflation numbers are also a cause of concern for the country, an exception to Moody’s Analytics’ general view of a subdued inflation environment in most of Asia.

“Inflation is subdued in most of Asia, and expected to only gradually pick up over 2021 because of rising oil prices and economies starting to reopen. India and the Philippines are exceptions. In these economies, inflation is above comfort levels, adding to the list of challenges for policymakers,” Moody’s Analytics economist Katrina Ell said.

“The Philippines is particularly worrisome. Elevated inflation, a large output gap, a recent resurgence of Covid-19 infections, and limited vaccine availability are all reasons for concern,” she added.

Moody’s Investor Service also recently announced that the spike in the country’s cases is a “credit negative” for the Philippine economy.

Credit negative for sovereigns usually means a further deterioration of these conditions may lead to a downgrade in the country’s current credit standing. The Philippines is currently rated Baa2, with a stable outlook by Moody’s.

“A delayed recovery will have effects on labor markets that could exacerbate income inequality and poverty. The government’s new measures could reverse recovery in the unemployment rate, which fell to 8.7 percent in the first quarter from a peak of 17.6 percent in the second quarter of last year; and the poverty incidence rate, which fell to 16.7 percent in 2018 from 26.3 percent in 2009 amid rapid economic growth,” the credit watcher said.

On the same day, Fitch Solutions, the research arm of the Fitch Group, said the rising cases in the country are creating “uncertainties” for the economy.

Thus, they expect the country to be in a state of recovery by late2021 through 2022 as the Philippine economy remains highly dependent on a resurgence in domestic consumption.

This situation, Fitch Solutions said, will push the Bangko Sentral ng Pilipinas (BSP) to keep its policy rates on hold for the rest of the year despite rising inflation numbers.

On Monday, the Philippines broke another all-time high number of new Covid-19 infections at 10,016 new cases.