MOODY’S Investors Service has lowered its growth forecast for the Philippine economy this year after taking into account the impact of the coronavirus disease 2019 (Covid-19) outbreak on the demand and supply chain in the Asia-Pacific.
The credit ratings agency now projects the country’s gross domestic product (GDP) growing to 6.1 percent this year, instead of the earlier 6.2 percent, it said in a report on Tuesday.
The outlook 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.
Although the debt watcher did not specifically discuss the Philippines, it said it assumed that the economic impact of the Covid-19 outbreak on the region would be limited to the first quarter.
“Our baseline assumption is that the economic effects of the coronavirus outbreak will continue for a number of weeks before tailing off and allowing normal economic activity to resume,” Moody’s Senior Vice President Christian de Guzman said.
Covid-19, which first broke out in the city of Wuhan in China’s central Hubei province in late December, has spread to more than two dozen countries, infected over 72,500 people and killed over 1,800 others, including one in the Philippines, as of Tuesday.
According to Moody’s, the impact would be felt in trade and tourism, and in some sectors through supply-chain disruptions.
“This shock comes on the back of a marked slowdown in 2019 as decelerating global trade hit the region,” it said.
With this, the credit rater lowered its growth forecast for China this year to 5.2 percent from 5.8 percent previously, “reflecting a severe but short-lived economic impact, with knock-on effects for economies across the region.”
Moody’s also expects Macao and Hong Kong to be hit the hardest, given their close economic integration with China.
Reduced Chinese demand for Asia’s exports and supply chain disruptions represent the two most direct transmission channels for slowing economic growth, although services trade adds a third channel, it added.
As such, the credit watchdog said goods and commodity exporters are most exposed to a protracted fall in Chinese demand, while tourism hubs relying on Chinese visitors would also be vulnerable.
“If [the] outbreak grew to pandemic proportions and [lasts for] several months into the year, downside risks to the global economy would be more severe and amplified beyond China through a number of different channels,” it warned.
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.