Metro Manila (CNN Philippines, May 12) — Fitch Solutions has downscaled its economic growth forecast for the Philippines this year to 5.3% from its previous 5.8% figure as the country continues to deal with the raging COVID-19 pandemic.

“We at Fitch Solutions believe the Philippines economy will continue to struggle amid its difficulties controlling the spread of Covid-19 and normalising economic activity,” the American research company said in a commentary published May 11.

The revised figure, like the preceding forecast, also falls below the government’s 6.5-7.5% target band for economic growth this year.

Fitch Solutions cited the current lockdown measures in main business hub Metro Manila and surrounding provinces — Bulacan, Cavite, Laguna, and Rizal — imposed by government in a bid to quash the alarming surge in daily infections recorded. The areas, collectively known as National Capital Region Plus, are under modified enhanced community quarantine until Friday.

“This will weigh substantially on economic activity in (the second quarter of 2021) and reflects the risks to the Philippines’ growth outlook over the coming quarters,” said the firm, also citing the country’s “slow” rollout of COVID-19 vaccines.

Latest government data shows over 1.95 million Filipinos have been vaccinated against the highly contagious disease so far, a small fraction of the country’s population of 108 million.

Fitch Solutions likewise flagged the recent 4.2% shrinkage in domestic economic output for the first quarter of 2021, with all major expenditure items similarly posting declines except for government spending. 

The group also forecast savings rates of households will remain high this year, citing the uncertainty from the health crisis and loss of income in the previous quarters. Fitch Ratings likewise projected the country’s employment situation is “unlikely to improve markedly” in the near term.

“With a retightening of Covid-19 restrictions in late-March, it remains highly unlikely the economy will improve in the next quarter, meaning the recovery will be stalled once again,” explained Fitch Solutions.

Economic managers earlier noted a possible “temporary reversal in employment gains” particularly in April given stricter quarantine restrictions, but expect a less severe impact given their “risk-managed” approach to quarantines.

The firm likewise slashed its growth forecast for the country in 2022 to 6.5%, from the previous 8.2%.

“We have revised down our outlook for the following year as well, given our expectations for Covid-19 to continue to disrupt activity at least” through the first half of 2022, said Fitch Solutions.

The new figure is a far cry from the 8-10% growth range targeted by economic managers for next year.

Source: CNN Philippines (https://cnnphilippines.com/business/2021/5/12/Fitch-Ratings-downscales-2021-PH-growth-forecast.html?fbclid=IwAR3aOJoYoPHuO6TZGYVUJTKnt23wg6hYHJX59JUtpHpjfEcqfa6-q088Zjc)