Moody's projects 2% Philippine economic contraction in 2020

Moody's Investors Service projects that the Philippine economy will contract by 2 percent in 2020, a more pessimistic forecast than the government's own estimates.

This economic downturn is attributed to the severe and widespread economic and financial shocks caused by the COVID-19 pandemic.

The projected contraction marks the first time the Philippine economy will shrink since 1998.

Moody's expects the economic decline to deepen in the second quarter due to the prolonged enhanced community quarantine (ECQ) measures.

The agency also anticipates a substantial softening of remittances from overseas Filipinos due to job losses and restricted deployment.

Despite the contraction, Moody's is maintaining the Philippines' credit rating at one notch above minimum investment grade with a stable outlook.

Lower growth and significant fiscal stimulus are expected to increase the government's debt burden to approximately 45 percent of GDP in the coming years.

However, the current account deficit is expected to remain narrow as reduced imports and lower oil prices offset the decline in exports, tourism, and services.

The Philippines' gross international reserves reached a record high of $89.0 billion in March 2020, indicating the stability of the overall balance of payments.