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UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assessed the latest stimulus measures by the Philippines to fight the impact of the COVID-19.

Key Quotes

“Philippines President Rodrigo Duterte announced yesterday (16 Mar) that the government would lock down its main Luzon Island until 12 Apr to contain the fast spreading of the COVID19 outbreak. On the same day, the Department of Finance unveiled a fiscal stimulus amounting to PHP27.1bn or 0.1% of GDP to fight the COVID-19 pandemic and mitigate economic losses.”

“The quarantine on Luzon Island, which makes up over half of the Philippine economy, will clearly place greater downside risks to overall economic growth this year. In view of the government’s stringent containment actions presently, a fiscal support of PHP27.1bn and downward revision of our China’s GDP growth forecasts, we are now assuming 0.5ppts downside risks to our earlier baseline growth forecast for the Philippines, bringing our 2020 full year GDP growth target down to 6.0% (from 6.5% previously).”

“On the monetary policy front, BSP will meet on Thursday (19 Mar) as planned, in which we believe that BSP will coordinate with G7 nations’ policy rate cuts to provide ‘double insurances’ against the adverse impact of the COVID-19 outbreak on the Philippine economy. Therefore, we raise our BSP rate cut expectations for this Thursday to 50bps from 25bps, bringing the overnight reverse repurchase rate lower to 3.25%.”