THE RISK of recession for the Philippines has risen due to the surging COVID-19 case count, making it likely to be among the worst-performing economies in ASEAN in the first half of 2021, Moody’s Analytics said.
“With additional targeted lockdowns and foreign travel bans imposed recently, the prospects for improved consumer spending and tourism remain gloomy and employment gains in the upcoming months will be limited,” Moody’s Analytics Associate Economist Dave Chia said in a note Monday.
Earlier this month, Moody’s Analytics said it expects the economy to grow 6.3% this year mainly due to base effects from a record 9.5% contraction last year which was the worst in ASEAN.
“We maintain our outlook that the Philippines will be one of the worst-performing economies in Southeast Asia, at least for the first half of 2021,” it said.
The financial intelligence unit of Moody’s Investors Service said the Philippines is now a laggard in the region in terms of managing the outbreak. It noted that while the Philippines had to impose restrictions again due to the rise in infections, Japan and South Korea are reporting receding case numbers.
The government has placed Metro Manila, Bulacan, Cavite, Laguna, and Rizal under the strictest quarantine settings due to the higher case count. The measures are in place between March 29 and April 4.
TOURISM RECOVERY HINGES ON VIRUS MANAGEMENT
The slow pace of vaccination and the increasing infections are threatening the recovery of the tourism industry and could lead travelers to opt for other destinations which they perceive to be safer, analysts said.
“The Philippines will be unable to capitalize on the rebound in tourism if it cannot provide a safe environment for tourists — they will be diverted to other places in Asia if there are persistent questions surrounding safety and flight and accommodation cancellations due to a possible new wave of infections around the corner,” Xiao Chun Xu, assistant director — economist at Moody’s Analytics, told BusinessWorld by e-mail.
Mr. Xu said the Philippines is faring worse than Vietnam and Thailand in terms of handling the crisis and ensuring a tourism industry recovery. He cited Thailand’s effort to negotiate travel bubbles, putting it in the best position to capitalize on the industry’s recovery.
Asian Institute of Management Economist John Paolo R. Rivera said the hospitality industry has been supported by the so-called “staycation” trade, while some open-air sites like Intramuros and parks have opened to the public. Some of these reopenings proved to be short-lived as quarantines were reimposed.
“Given the latest restrictions, the first whose recovery process has been affected are those in the food and beverage sectors as dine-in has been suspended again,” Mr. Rivera said.
Aside from ensuring herd immunity to boost demand, Mr. Rivera said it would be crucial for the government to help the tourism industry build the capacity to tap alternative sources of income.
“It’s all about building trust and confidence among tourists that the Philippines is a safe destination beyond minimum health standards,” he added.
Moody’s Analytics said speeding up the vaccination drive will be key to improving the consumption-driven economy.
“As consumption is a major component of the country’s economic activities, curbing the spread of coronavirus and vaccination are key to its economic recovery,” Moody’s Analytics said.
The Department of Health has reported that 508,332 doses have been administered as of March 23. The government is hoping to inoculate 70 million people by the end of 2021. — Luz Wendy T. Noble