MANILA - Fitch Solutions lowered its economic growth forecasts for the Philippines for this year and next year noting that the country is having difficulty checking the COVID-19 outbreak, and is struggling to vaccinate its citizens.
Fitch Solutions Country Risk and Industry Research said it forecasts gross domestic product to grow 5.3 percent this year, down from an earlier forecast of 5.8 percent.
For 2022, Fitch also lowered its GDP growth forecast to 6.5 percent, from an earlier forecast of 8.2 percent.
Economic output in nominal terms is also seen to stand 11.5 percent lower than its pre-pandemic trend level by 2025, Fitch said.
It noted that the Philippines reimposed lockdowns in March amid a fresh surge of COVID-19 cases.
“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,” the financial services and analysis firm said.
Fitch said the Philippines is highly vulnerable to lockdowns given its significant dependence on domestic activity for growth.
Despite the severity of the lockdowns, however, Fitch noted that the Philippines is facing its worst outbreak so far, and is likely to continue stringent restrictions.
“Constraints on domestic activity are likely to be in place through the rest of 2021, but given the recent outbreak, we now expect these to be more stringent than we had previously assumed.”
It added that “the economy will continue to be hamstrung by the pandemic” noting that the government is struggling with its vaccine rollout, with only 1.8 percent of the population vaccinated as of May 9.
The government has said that it intends to vaccinate 70 million people before the end of the year.
ABS-CBN News' vaccine tracker shows only 0.74 percent, or 514,655 of this 70 million target, has been fully vaccinated as of May 11.
Fitch said this commentary from Fitch Solutions Country Risk & Industry Research on the Philippines' growth prospects is not a comment on Fitch Ratings' Credit Ratings, which is another unit of the firm.
Last January, Fitch Ratings affirmed the Philippines' credit rating at 'BBB' with a stable outlook. However, the ratings agency said the economic impact of the COVID-19 shock for the Philippines in 2020 was more significant than previously expected.
The Philippine economy shrank 4.2 percent in the first quarter, the first straight quarter of contraction. Last year, the economy contracted 9.6 percent, its worst performance since the end of World War 2.
Despite this, economic managers are sticking to their 6.5 to 7.5 percent growth target for the year saying the country has time to “catch up.”