The COVID-19 pandemic inflicted the world not only the virus but a tight restriction to almost all sectors of the government resulting to the decline of the entire world’s economy. This leads to an increase of unemployment rate in the Philippines. According to the latest data from Philippine Statistics Authority in 2020, unemployment rate in July 2020 was estimated at 10.0 percent. This is higher than the unemployment rate of the same month a year ago placed at 5.4 percent, but lower than the record high 17.7 percent during April 2020. Unemployed Filipinos who are 15 years old and over was estimated at 4.6 million in July 2020, higher by 2.1 million compared to the same period a year ago but lower by 2.7 million from three months ago.
The economic impact of the Covid-19 shock for the Philippines in 2020 was more significant than we had previously expected thanks to the domestic infection rate and government policy measures to curb the spread of the virus.
However, it is expected that the economic activity will recover this year. Several factors can influence this recover. First, if there will be an effective vaccine rollout then the country’s economy could result to a faster growth recovery. The government’s response and support given to several pharmaceutical companies will also help boost our economy. The pandemic shock is now eroding and businesses and activities are being liven out resulting to a higher economic movement.
According to Fitch Ratings there are several factors that could, individually or collectively, lead to positive rating action/upgrade:
1. Public Finances: Sustained broadening of the government’s revenue base that enhances fiscal finances and places the government debt/GDP ratio on a downward trajectory.
2. Structural: Strengthening of governance standards towards those of the rating-category peer median.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
1. Public Finances: A sustained rise in the government/debt to GDP ratio associated, for example, with a reversal of reforms or departure from a prudent macroeconomic policy framework that leads to sustained higher fiscal deficits.
2. Macroeconomic: Failure to resume historically high economic growth rates after the coronavirus shock subsides, potentially reflecting a loss of macroeconomic policy credibility or structural economic damage from the crisis.
3. External: Deterioration in external indicators, including foreign-currency reserves, the current account deficit and net external debt, which lowers the resilience of the economy to shocks.
By: Marlon F. Bravo
