S&P cuts PH growth forecast to 6.1%
Credit to Author: Mayvelin U. Caraballo, TMT| Date: Wed, 19 Feb 2020 17:37:23 +0000
S&P Global Ratings has trimmed its growth outlook for the Philippine economy this year as it believes the coronavirus disease 2019 (Covid-19) outbreak will weaken the country’s supply chains.
The credit rating agency now projects Philippine gross domestic product (GDP) to expand by 6.1 percent, lower than its previous forecast of 6.2 percent.
The updated outlook, which S&P released in a report on Wednesday, is higher than last year’s economic expansion of 5.9 percent, but lower than the 6.5 to 7.5-percent growth target of the government.
“This article focuses more on economic than viral transmission, and we see four channels: People flows, supply chains, goods trade and commodity prices in order of importance,” the debt watcher said.
For the Philippines alone, it explained the economy was more vulnerable to supply chains than people flows.
“More uncertain is the impact on supply chains,” S&P said, highlighting that the Philippines was both upstream and downstream from China with processed intermediate trade with the country accounting for about 15 percent of overall trade.
It also said the country was dominated by electronics components, which might experience region-wide disruptions.
“The OECD (Organization for Economic Cooperation and Development) estimates that the Philippines’ domestic value-added in gross exports is over 75 percent, which is high by emerging market standards, although it is likely to be lower in the electronics industry,” the credit watchdog added.
On the investment side, S&P said China’s inward foreign direct investments (FDI) in the Philippines was only 3 percent of GDP, while the Chinese share of approved FDI was typically less than 3 percent.
The S&P report comes a day after Moody’s Investors Service trimmed its growth outlook for the Philippines to 6.1 percent after taking into account the impact of the Covid-19 outbreak on the demand and supply chain in the Asia-Pacific.
Earlier, the government estimated that the outbreak’s impact could shave as much as 0.7 percent of the country’s GDP if it lasts the entire year.