FINANCE Secretary Carlos Dominguez III said Tuesday, Feb. 4, 2020, that the Philippine economy would be able to sustain its momentum of growth this year despite the challenges posed by the global spread of the 2019 novel coronavirus acute respiratory disease (2019-nCoV ARD), the eruption of Taal Volcano and the outbreak of the African swine fever (ASF) in the country.
Dominguez told senators that the economic team stands by its target of attaining a gross domestic product (GDP) growth rate of 6.5 to 7.5 percent amid the aggregate effects of these challenges to the country’s economic performance this year.
“At this moment, it is reasonable to expect that while these developments might slightly restrain our economic expansion, these threats are not enough to force a dramatic reduction in our growth estimates,” said Dominguez, who heads the economic team, during Tuesday’s joint hearing of the Senate committees on health and demography, and on finance.
Dominguez said the progress of the 2019-nCoV ARD should be assessed together with the effects of the recent Taal volcano eruption and the ASF outbreak to determine whether these require revisiting economic growth targets this year.
“While these developments may dampen our growth somewhat, domestic tourism is expected to increase as more people would likely prefer to travel within our borders, thus boosting domestic consumption. With our ‘Build, Build Build’ program firing on all cylinders this year, complemented by a benign inflation rate and a stable monetary policy, we expect the economy at large to sustain its momentum,” Dominguez said.
Given that the 2019-nCoV ARD outbreak is still on its early stages, it would be difficult for the economic team to estimate its potential economic costs at this time, Dominguez said.
“We are consoled by the observation that the virus has limited local transmissions outside China,” he said. “A significant impact on the economy will most likely be centered in the tourism sector. The travel and tourism industry around the globe is taking a hit as a result of the various levels of travel bans imposed by national governments and of voluntary decisions of airlines to cut flights to and from China.”
Better run this year
In a separate interview, an official from Metrobank is hopeful that the Philippine economy will have a better run this year amid the global health issues and trade tensions.
Jette Gamboa, Metrobank head of strategic planning and investor relations, said the economy still points to an upward projection amid the outbreak of the 2019 n-CoV ARD.
Metrobank forecasted that the country’s economy will likely grow at a faster pace this year to be driven by the low inflation, early passage of the 2020 budget and stable oil prices and peso.
“I think that the impact of the virus will be contained. The drivers of the economic growth are very solid. It is going to be driven by government spending and infrastructure-related projects. Hopefully, these will have trickle-down effects,” said Gamboa.
“Interest rates are still low and I think it will spur demand. Investors’ sentiment is also quite positive. I think 2020 should be a good year,” she added.
Gamboa said it is too early to confirm that the 2019-nCoV ARD will significantly impact the growth projections for this year similar to the eruption of Taal Volcano.
“The critical drivers are well in place,” she said. “We are hoping that we can really pierce the six percent GDP growth.”
Dominguez added that the Philippines may also suffer a short- term slight decline in exports, particularly in the sale of electronics and auto parts, because of a possible disruption in the global supply chain as a result of the temporary factory closures in China, which is the country’s top trading partner.
“Incidentally, our top imports from China such as steel, machinery and petroleum are products that do not seem to carry the 2019-nCoV ARD virus, though we will continue to take all necessary precautions,” Dominguez said.
Tourism impact
Dominguez said that what happened during the previous outbreaks of the Severe Acute Respiratory Syndrome (Sars), H1N1 and the Middle East Respiratory Syndrome (MersCoV) might give us a glimpse of how the 2019-nCoV ARD could impact the economy.
He recalled that during the Sars episode, tourist arrivals to the Philippines dropped by 1.3 percent, from 1.93 million in 2002 to 1.90 million in 2003, according to the Philippine Statistical Yearbook. But the tourism sector rebounded quickly the following year, with arrivals increasing 20.1 percent to 2.3 million visitors.
The number of tourist arrivals continued to rise until the H1N1 outbreak in 2009, which was also the period when the global economy was reeling from the effects of the global financial crisis.
As for the MersCoV outbreak in 2012, Dominguez said the tourism sector also proved to be resilient during that period.
In the last few years, he said, the country’s tourism direct gross value added has been rapidly rising, mainly because of a substantial increase in arrivals from China. Thus, during the period when travel restrictions are in place for the health and safety of Filipinos, it is very likely that tourism direct gross value added will decrease this year.
“It is still too early to ascertain the economic effects of these efforts to safeguard our people, but the Department of Tourism (DOT) will provide periodic updates as the situation evolves,” he told the senators at the hearing.
Dominguez said the DOT committed to continue aggressively looking for opportunities in partnership with all tourism stakeholders to sustain the gains of the tourism sector and will intensify the promotion of local destinations among domestic travelers.
Supply chain issue
The lockdown imposed by the Chinese government on Wuhan City, the epicenter of the 2019-nCoV ARD outbreak, which is also considered the hub of transport and industry for central China, could create some supply chain problems that will affect trade and industries in other parts of the world. But Dominguez said, “at this point, it is too early to estimate (its) full economic impact.”
To address the possible temporary decline in the exports of electronics and auto parts, the Department of Trade and Industry (DTI) also committed to work closely with affected Chinese and China-based companies, which will be looking to strengthen their operations by adding a production site outside of China, Dominguez said. (KOC WITH PR)