The Philippines will be less vulnerable to slowing economic growth in 2020 than its more export-oriented neighbors, Moody’s Investors Service said.
Moody’s said Friday that “trade-reliant” economies in the region are expected to feel the effects of the slowdown more markedly, including Hong Kong, Singapore and South Korea.
“We project the slowest rates of growth since the global financial crisis for Hong Kong, Singapore and Korea,” Moody’s said.
It said the Philippines will likely see a more muted decline alongside India, Sri Lanka, China and Japan.
In the first half, Moody’s said the “sharp decline” in exports by South Korea, Japan, Malaysia, Singapore and Hong Kong could be traced to “softening global conditions” with slowing export momentum and weakening demand.
Moody’s cut its Philippine GDP growth forecast to 5.8% for this year from the 6% estimate it issued in May, and maintained a 6.2% forecast for 2020.
The debt watcher said the Philippines’ weaker-than-expected 5.5% GDP growth in the first half was more domestic-driven due to the four-month 2019 budget delay which “disrupted” funding for new projects especially infrastructure.
Economic managers and economists had also blamed the budget impasse for the slower GDP expansion in the first half. They cited data indicating that government spending was picking up in July, rising 3.43% year-on-year to P339.4 billion.
The government operated on a reenacted 2018 budget until mid-April when the President signed this year’s national budget, of which he vetoed P95.3-billion worth of funding, reducing the budget to P3.662 trillion.
Meanwhile, Moody’s revised downwards its 2019 GDP forecast for Singapore and Hong Kong to 0.5%.
“Bangko Sentral ng Pilipinas has started to unwind the tightening precipitated by a spike in food inflation in 2018, while employing reserve requirements to more actively manage systemic liquidity,” it said.
The bank reserve requirement ratio was at 16% for big banks and 6% for thrift banks after the completion of 200 basis points (bps) worth of phased cuts by the BSP in July.
Interest rates are now in the 3.75% to 4.75% range following the 25-bp cut by the central bank on Aug. 8.
The BSP said recent cuts were due to weak GDP growth and easing inflation in July. — Beatrice M. Laforga|bworldonline