Moody’s Analytics has expressed concern at the current state of the Philippine economy, saying that the country’s growth prospects this year are facing significant downside risks.
“The Philippines economy is in a worrisome state. Elevated inflation, a large output gap, a recent resurgence of Covid-19 (coronavirus disease 2019) infections, and limited vaccine availability are all reasons for concern,” it said in a report released on Friday.
Latest data showed that consumer price growth in the country last month picked up to an over two-year high of 4.7 percent because of higher pork prices in areas outside Metro Manila.
“The uptick was driven by food shortages, with swine flu a significant contributor the disease has reportedly wiped out over one-third of the country’s pig stocks. Demand-pull inflation is weak and will remain that way into the June quarter,” Moody’s Analytics said.
Meanwhile, since mid-March, the country has seen the daily Covid-19 infection toll consistently breaching the 5,000 mark, prompting the national government to place the National Capital Region, Bulacan, Cavite, Laguna and Rizal under general community quarantine from March 22 to April 4, 2021.
Moody’s Analytics added that vaccine availability in the country has been limited, putting the Philippines at continued risk of further outbreaks in the near term.
“Recent reports indicate that the archipelago has so far only received enough vaccines for 1 percent of the population, with current estimates indicating that the population won’t be fully vaccinated until 2023,” it said.
It can be noted that vaccines donated by the private sector were only made available to medical workers as the national government is still in the process of securing funds to inoculate at least 70 million Filipinos or 100 percent of the adult population within the year.
“With these challenges, it was not surprising that the Bangko Sentral ng Pilipinas (BSP) looked past the recent above-target inflation and kept monetary settings accommodative in March, with the policy rate remaining at a record-low 2 percent, where it has been since November,” Moody’s Analytics added.
On Thursday, the BSP’s overnight borrowing, lending and deposit rates were maintained at their record-low of 2.00 percent, 1.50 percent and 2.50 percent, respectively, after the Monetary Board’s second rate-setting policy meeting for 2021.
Moody’s Analytics said it sees the BSP retaining its current monetary settings on hold this year and that further policy support will come from more targeted fiscal measures as the economy weathers a slower-than-expected recovery this year.
The research arm of credit ratings agency Moody’s Investors Service added that its 6.3-percent growth estimate for the Philippine economy “has significant downside risks at this stage.”
“The government is opposed to national lockdowns, but the recent spike in local infections means that the economic recovery could easily be further stalled at least through the first half of 2021,” it stressed.
Moody’s Analytics’ growth estimate is lower than the government’s official forecast range of 6.5 to 7.5 percent, but a turnaround of the economy’s 9.5-percent contraction last year.