Moody's: 7% GDP contraction, worse than gov't’s -5.5%

Debt watcher Moody's Investors Service has revised its economic outlook for the Philippines, projecting a GDP contraction of 7% in 2020.

This revision is more pessimistic than both the government's projection of a -5.5% contraction and Moody's earlier forecast of a 4.5% drop.

The downgrade follows a record 16.5% year-on-year GDP decline in the second quarter due to stringent COVID-19 lockdown measures, with Metro Manila and neighboring provinces reverting to stricter quarantine measures in August.

Moody’s noted that factors for a recovery in the second half of the year are less robust than previously expected, citing impacts on labor markets, remittances from overseas Filipino workers, manufacturing production, and tourism.

The non-seasonally adjusted unemployment rate surged by 17.7% in the second quarter, while OFW remittances dropped by 9.9%, the first negative print since 2015, with a further decline of 4.2% to $14.019 billion in the first six months of 2020.

Despite these challenges, Moody's forecasts a recovery for the Philippine economy next year of about 6.8 percent within the economic managers' 6.5-7.5 percent target band until 2022.