Finance Secretary Carlos Dominguez III said Tuesday the Philippine economy would be able to sustain its momentum of growth this year despite the challenges posed by the global spread of the novel coronavirus (nCoV), the eruption of Taal Volcano and the outbreak of the African Swine Fever (ASF) in the country.
Dominguez told senators 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, who heads the economic team, during this morning’s joint hearing of the Senate committees on health and demography, and on finance.
Sen. Christopher Lawrence Go, the chairman of the Senate health and demography committee, presided over the hearing.
While the hearing was called to study ways of mitigating the impact of the nCoV outbreak on the economy, Dominguez said this development 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 nCoV 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.”
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, 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,” Dominguez said.
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 nCoV 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.
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 direct gross value added actually 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.
“It is still too early to ascertain the economic effects of these efforts to safeguard our people, but the Department of Tourism will provide periodic updates as the situation evolves,” he told senators at the hearing.
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.
During the Senate hearing, Dominguez cited the “unprecedented effort” mounted by the Chinese government to contain the spread of the disease.
“We acknowledge the determined and comprehensive efforts of the Chinese government toward containing this virus,” Dominguez said. “To date, the only death that occurred outside China has unfortunately happened here, although it involved a traveler carrying the virus directly from Wuhan.”
On the part of the Philippine government, he said President Duterte has enforced a ban on travelers from China and its special administrative regions as what other countries have done, and has also ordered the establishment of a repatriation and quarantine facility.
As for the ASF outbreak, Dominguez noted that 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 that 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 Jan. 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 pesos 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,” Dominguez said. “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.”
He said the DA and the concerned local government units (LGUs) are expediting 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.