Moody’s cuts growth outlook

The degree and pace of recovery are subject to uncertainties related to the coronavirus pandemic, as well as the progress on vaccination

International credit watcher Moody’s Investors Service downscaled its outlook for the Philippines’ local economy growth for 2021 amid its affirmation of the country’s strong fundamentals.

“We forecast that the country’s real GDP (gross domestic product) will grow by 5.8 percent in 2021 and 6.5 percent in 2022, supported by an improvement in consumer spending and investment amid fiscal support,” Moody’s said.

The latest 2021 GDP projection reflects a notable decrease from its previous 7 percent view.

“The degree and pace of recovery are subject to uncertainties related to the coronavirus pandemic, as well as the progress on vaccination,” it quickly added.

According to Moody’s, the recent reimposition of lockdowns in March, although more lenient, will threaten the expectation for a sharp rebound in real GDP growth for the year.

“We maintain a one-notch negative adjustment for credit conditions to capture the risks associated with its historically excessive pre-pandemic credit growth, particularly considering its elevated real estate exposure,” the credit watchdog said.

Strong Q2 growth

In a related development, Finance Secretary Carlos Dominguez III said that the Philippines’ second quarter GDP growth is “going to look pretty good,” refusing to cite any specific number or range.

“I’m not going to say exactly what they are now but I think, from what we’ve seen in May, where our unemployment numbers have dropped, our underemployment has dropped and the fact that we have created about two and a half million new jobs over last year seems to be good signs for us,” Dominguez said in a live interview on Wednesday.

Still, the Finance chief expressed his confidence that the eyed increase in GDP will allow the country to hit its growth target of 6 to 7 percent for 2021.

Further, Dominguez said that the Development Budget Coordination Committee will revisit its current macroeconomic assumptions shortly after the second quarter growth data has been released in August.