The Covid-19 pandemic has battered the Philippine economy, as well as the rest of the world. But despite the gloomy situation, the Philippines remains a bright shining star in the eyes of reputable financial institutions like Standard & Poor’s (S&P).
Major credit rating agency S&P affirmed its stable outlook on the Philippine economy on May 29 as the government began to ease restrictions to allow more people to work and more business establishments to reopen.
The institution just affirmed its “BBB+” long-term and “A-2” short-term sovereign credit ratings on the Philippines, with a stable outlook. It also expects the economy to rebound by as much as 9 percent next year. (This may be an overly optimistic projection. I expect the economy to expand by 8 percent at best in 2021.)
S&P’s statement is nonetheless comforting, and comes at a time when everybody seems to be pessimistic as people struggle with various modes of quarantine restrictions.
“The stable outlook reflects our expectation that the Philippines’s orthodox policy-making will continue to underpin its credit metrics, and that the economy will rebound strongly in 2021,” says S&P Global Ratings in a statement.
S&P released the statement as most countries in the world continued to suffer from the impact of the health crisis. Most countries closed their borders and issued stay-at-home orders to their citizens in April and May. In the Philippines, the government implemented an almost 11-week enhanced community quarantine to prevent the spread of the Covid-19 pandemic.
This vote of confidence on the Philippine economy at a time when we continue to address the pandemic should encourage the government to allow more economic sectors to reopen, while ensuring that the public follows strict health protocols spelled out by authorities. Under ECQ, only sectors considered essential such as hospitals, drug stores, utilities, energy and telecom companies, media, wet markets, veterinary clinics, grocery stores, food and medicine manufacturers, delivery services, funeral services, banks, the stock market and some government offices are allowed to operate.
The transition of Metro Manila from ECQ to general community quarantine on June 1 enabled more businesses to reopen. Trains and some buses resumed operations, carrying a fraction of their normal passenger capacity in observance of social distancing guidelines. Airlines were also allowed to resume domestic flights.
Other sectors such as dine-in restaurants, barbershops and even hotels are expected to reopen with limited capacity this week or in the coming weeks.
Other parts of the country that were placed under the general MCQ gave residents greater mobility as long as health protocols such as the wearing of face masks outdoors and social distancing are observed at all times.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno, meanwhile, was quoted as saying that economic activities could improve to 75 percent of their capacity by July from around 50 percent in June after we emerged from the 11-week enhanced community quarantine.
If we are able to contain the pandemic in the next two or three months, economic activities could be in full swing by the fourth quarter, which will put us in a very good position to significantly expand in 2021, as S&P predicted.
I share S&P’s optimism that the Philippine economy would achieve a strong recovery by 2021, following a slowdown due to the Covid-19 pandemic this year.
The rating agency noted that the Philippines was among the fastest- growing in the world on a 10-year weighted-average per capita basis—a reflection of its supportive policy dynamics and improving investment climate. With continued growth, S&P expects the GDP per capita in the Philippines to rise to almost $3,540 by this year; $3,800 by 2021; $4,200 by 2022; and $4,600 by 2023.
This means that despite the temporary setback this year, we are on course to become an upper middle-income economy in the short term, and perhaps an advanced economy in the next decade or two for the benefit of our children.
Let us pray that the global health crisis will be contained as soon as possible, so that we can restore our economic strength and keep our place among the fastest-growing economies in the world.
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