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Fitch Ratings warns of low-base distortions in 2021 growth data

THE Asia-Pacific economic recovery in 2021 could be “misleading,” with apparent rebounds that are actually the result of the low base formed by 2020, while fresh outbreaks could also deal setbacks to pandemic containment efforts, Fitch Ratings said in a report Monday.

“In many cases, GDP (gross domestic product) will not return to pre-pandemic levels until the end of 2021 or 2022,” it said.

Fitch Ratings expects the Philippine economy to contract by 8% this year before rising 9% in 2021. Government economic managers expect a contraction of between 8.5% and 9.5% this year and forecast growth of between 6.5% and 7.5% in the coming year.

Fitch Ratings said virus caseloads in the Philippines, India, and Indonesia have only recently levelled off, with China, Taiwan, South Korea, Japan, Vietnam and Thailand having contained their outbreaks earlier.

“Even the successful countries have seen new outbreaks, necessitating re-imposition of restrictions as they await vaccines later in 2021,” it said.

Fitch Ratings added that economies that rely on remittances could undergo a period of adjustment as the migrant workforce is gradually summoned back to the host countries, though it noted that the Philippines, Bangladesh, and Sri Lanka have held up better than expected.

“This may reflect temporary factors related to the return of migrant workers and the channels through which they remit funds,” Fitch Ratings said.

Remittance inflows to the Philippines declined 1.4% year on year to $21.886 billion in the nine months to September, less severe than the decline of 2% projected by the central bank over the full year.

Separately, S&P Global Ratings Asia-Pacific Chief Economist Shaun Roache said in a webinar Monday that Asian economies will experience “less acute” downside risk from US-China tensions and cited the possible impact of “stimulus withdrawal” next year.

“Supply-side, Asia is leading the recovery, but  Asia leading the demand-side is not true,” Mr. Roache said, noting that consumption is still far behind the pre-pandemic levels.

S&P expects the Philippine GDP to contract by 9.5% this year before growing 9.6% and 7.6% in 2021 and 2022, respectively. — Luz Wendy T. Noble

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