Finance Secretary Carlos Dominguez III has expressed confidence the resiliency of the economy despite the impact of the novel coronavirus (nCoV), the eruption of Taal Volcano and the outbreak of the African Swine Fever (ASF) in the country.
At a Senate hearing yesterday, Dominguez said the economic team stands by its target of attaining a gross domestic product (GDP) growth rate of 6.5 to 7.5 percent notwithstanding 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, head of the economic team.
The Senate health and demography committee held a meeting to discuss the impact of nCov.
Dominguez said this development should be assessed together with the effects of the eruption of Taal Volcano 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.
Dominguez said given that the nCoV outbreak is still on its early stages, it would be difficult for the economic team to estimate its potential economic costs.
But he said the country can be consoled by the fact that the virus “has limited local transmissions outside China.”
“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,” he said.
Dominguez, however, said the country may also suffer a short-term slight decline in exports, particularly in the sale of electronics and automotive 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, he added.
“Incidentally, our top imports from China such as steel, machinery and petroleum are products that do not seem to carry the nCoV virus, though we will continue to take all necessary precautions,” he said.
Dominguez said the country can take a guide from the Philippines’ experience in the outbreak of the severe acute respiratory syndrome (SARS), H1N1or swine flu and the Middle East respiratory syndrome (MERSCoV) as to the nCov’s impact.
During the SARS episode, he said, tourist arrivals to the Philippines dropped 1.3 percent from 1.93 million in 2002 to 1.90 million in 2003 but 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. Thus, the financial crunch at that time could have had a larger impact on the downtrend in tourist arrivals,” Dominguez said.
As for the MERS-CoV outbreak in 2012, Dominguez said the tourism sector also proved to be resilient during that period.
Dominguez pointed out that even with a slight decrease in tourist arrivals in 2003, tourism ‘s direct gross value added even increased by 8.8 percent, compared to the preceding year owing to increased average spending per tourist.
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,” he said.
Dominguez said the Department of Tourism (DOT) has 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.
The lockdown imposed by the Chinese government on Wuhan, the epicenter of the nCoV 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, Dominguez said, but “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) has 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.
As for the ASF outbreak, Dominguez said the government has been successful in intercepting contaminated pork imported from other countries through the Bureau of Customs (BOC)’s intensified anti-smuggling campaign and the Bureau of Animal Industry (BAI)’s heightened meat inspection efforts.
The Department of Agriculture (DA), has, to date, reported that the number of culled swine has reached 193,350, which led to a decline in hog production in 2019 by 9.5 percent compared to the preceding year.
While customs authorities have been intercepting the entry of contaminated pork like what it did recently with 25 tons of meat from Guangzhou, China, the DA has also been strictly enforcing biosecurity measures and setting up more quarantine checkpoints, as well as providing more disinfection facilities to manage, contain, and control the spread of the ASF, Dominguez said.
As for the impact of the latest Taal Volcano eruption, Dominguez said an explosive eruption could still happen, and “unless and until this actually happens, we can only speculate on the full impact of this episode on the economy.”
As of January 20, estimates from the National Economic and Development Authority (NEDA) show that the total foregone income in the economic sectors owing to the eruption could reach P6.66 billion or 0.26 percent of the 2018 gross regional domestic product of the CALABARZON (Cavite, Laguna, Batangas, Rizal and Quezon) corridor.
“The bulk of the foregone income comes from agriculture and fisheries sector, services, and industry. Short of a major eruption, the damage to our crops and the challenges of dislocated communities to which the government will continue to respond, will not significantly impact our overall growth projections,” Dominguez said.
He said the DA and the concerned local government units (LGUs) are fast-tracking the release of production support, agri-fishery aid and livelihood assistance, and cash or zero-interest loan assistance programs to the affected farmers and fisherfolk, as well as the implementation of the recovery and rehabilitation plans for the affected areas.
