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Ian Nicolas Cigaral (Philstar.com) – February 22, 2021 – 6:22 pm
MANILA, Philippines – The Philippines is at greatest risk of permanent economic scars from the pandemic if recovery in Southeast Asia is delayed, a global debt watcher said.
In a report on Monday, S&P Global Ratings said the Philippines would likely see a “permanent loss” of 12.6% if the economic recovery stalled for 6 months. Permanent loss is the gap between the S&P estimate of the new achievable normal for an economy and the pre-COVID trend.
Under this scenario, production is unlikely to return to the pre-pandemic level until May 2022, later than the credit rating agency’s baseline forecast for the Philippines to fully recoup losses by the end of this year. This would also lower 2.5 percentage points from S & P’s 9.6% baseline growth projection for the country in 2021.
In addition to the Philippines, Thailand is also considered to suffer a large permanent loss, but a lower rate of 10.8% should it recover from pandemic shock is delayed for half a year.
“The Philippines suffered a deep contraction in 2020 amid exceptionally tight mobility restrictions. For Thailand, the problem is structural and related to the tourism sector, which is expected to be one of the last industries to recover from COVID,” S&P said.
After the Philippines and Thailand, Malaysia is forecast to suffer a permanent loss of 8.6% in the same scenario, while Indonesia is forecast to suffer a milder damage of 7.7%. For all of Southeast Asia, S&P estimated a permanent loss of 9.2%.
“Southeast Asia has been struggling with sporadic outbreaks of COVID-19. The main emerging markets in this region – Indonesia, Malaysia, the Philippines and Thailand – are living with the effects of new waves that only recently appear to have peaked. This it could prolong their paths to recovery, “S&P said.
At home, the government’s pandemic task force recommended President Rodrigo Duterte to place the entire country under modified general community quarantine (MGCQ), the lowest level of quarantine, starting next month to reactivate the economy.
But it appears plans to reopen even further are failing to inspire confidence among consumers amid the lack of a comprehensive immunization program and after the detection of two virus mutations in Cebu last week. According to S&P, this creates a big problem that is not otherwise unique to the Philippines.
“In our opinion, the biggest threat to the timely economic recovery is individual consumer behavior, as people stay home more and spend less,” S&P said. “Household spending is key to the growth of these (Southeast Asian) economies.”
On the growth side, a 6-month delay in recovery would slow growth this year to 7.1% as projected by the S&P. Setbacks shorter than 2 months or 1 month would result in an expansion of the gross domestic product by 7.4% or 7.7%, respectively. The baseline projection was for 9.6% growth this year.
Going forward, S&P said Southeast Asia could benefit from improved demand in the United States and China, while consumer appetite in the region remains anemic. This would be true once the nascent Biden administration implements a massive spending plan to mitigate the pain of the pandemic as China advances its recovery. However, the windfall would not be enough to fully underpin the rebound in the region itself.
“Emerging markets in Southeast Asia cannot rely solely on external demand to fuel above-trend growth later this year. However, these tailwinds could fuel a light-based domestic recovery in the end. of the pandemic tunnel. ” S&P said.
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