Senate President Vicente Sotto, Senator Christopher ‘Bong’ Go, Chairman of the Senate Committee on Health and Demography, Honorable Senators Miguel Zubiri, Franklin Drilon, Koko Pimentel, Nancy Binay, RisaHontiveros, Ronald dela Rosa, Joel Villanueva, Francis Pangilinan, Imee Marcos and Francis Tolentino, Senator Ping Lacson, members of the Cabinet, fellow workers in government, good morning.
Thank you for inviting me to today’s hearing.
This year opens with a few major challenges to our economy, and we have to take stock of their potential aggregate impact on our economic performance. These are the African Swine Fever or ASF, eruption of Taal Volcano, and the global spread of the novel coronavirus.
We have been dealing with the ASF since last year. The effort to contain this epidemic is spearheaded by the Department of Agriculture. Until cases surfaced last week in Mindanao, the incidence of the disease had been mainly concentrated in Central Luzon.
Containing the ASF required culling infected pigs and safely disposing of them. To date, the Department of Agriculture reported that the number of culled pigs has reached 193,350. This led to losses for swine cultivators and a decline in the value of our hog production last year by 9.5 percent compared to the preceding year.
We continue to successfully intercept contaminated pork imported from other countries through the Bureau of Customs’ intensified anti-smuggling campaign and the Bureau of Animal Industry’s heightened meat inspection efforts. Last January 24, the two agencies intercepted 25 tons of meat from Guangzhou, China which tested positive for ASF. The disposal of the contaminated meat started on January 31 and is currently ongoing at the Integrated Waste Management Facility in Cavite. Furthermore, the Bureau of Customs has also filed cases against entities that were caught smuggling goods contaminated with the disease.
The Department of Agriculture is 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 ASF. Zero-interest rate loan assistance programs will also be given to affected hog raisers. We reiterate the announcement made by the DA that ASF is non-transmittable to humans, and that pork is safe for consumption.
Meanwhile, ongoing activity under Taal Volcano could still result in a more explosive eruption. However, unless and until this actually happens, we can only speculate on the full impact 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 due to the eruption could reach 6.66 billion pesos or 0.26 percent of the 2018 gross regional domestic product of Region 4-A or CALABARZON. 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.
We are confident that the Department of Agriculture and the concerned local government units are fast-tracking the release of production support, agri-fishery aid and livelihood assistance, and cash or zero-interest rate loan assistance programs to the affected farmers and fisherfolk, as well as the implementation of the recovery and rehabilitation plans of the affected areas.
The 2019 novel coronavirus, on the other hand, might very well be at an early stage of its global outbreak. So far, 99 percent of the infections and a large majority of the casualties have been confined to Hubei province in China. The Government of the People’s Republic of China has mounted an unprecedented effort to contain the spread of this virus.
We acknowledge the determined and comprehensive efforts of the Chinese government towards containing this virus. To date, the only death that occurred outside China has unfortunately happened here, although it involved a traveler carrying the virus directly from Wuhan.
While the World Health Organization has not recommended travel restrictions, the Philippines, along with several other countries, is enforcing a ban on travelers from China and its special administrative regions. President Duterte has also ordered the establishment of a repatriation and quarantine facility.
Given that we may be in the early stages of this outbreak, it will be a challenge to estimate its potential economic costs. We are consoled by the observation that the virus has limited local transmissions outside China.
As we continue to implement proactive measures to keep our people safe, the global medical research community is working on identifying a cure.
A significant impact on the economy will most likely be centered on 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.
What has transpired in the aftermath of the outbreak of the SARS, H1N1, and MERS-CoV may give some preview on how the current novel coronavirus outbreak will unravel.
During the SARS episode, tourist arrivals to the Philippines dropped by 1.3 percent, from 1.93 million in 2002 to 1.9 million in 2003 according to the Philippine Statistical Yearbook. But in 2004, tourist arrivals rebounded quickly by 20.1 percent totaling 2.3 million for that year.
Subsequently, tourist arrivals had increased continuously until the H1N1 outbreak in 2009, which resulted in a slight decrease in arrivals. Note, however, that the world economy at that time was reeling from the effects of the Global Financial Crisis, which is likely to have had a larger impact on tourism. Philippine tourism also proved resilient during the outbreak of the MERS-COV.
It is worth noting that even with fewer arrivals in 2003, tourism direct gross value added actually increased by 8.8 percent compared to the previous year due to increased average spending per tourist. In the last few years, however, our tourism direct gross value added has been rapidly rising, mainly due to a substantial increase in arrivals from China. While travel restrictions are in force to protect the health of Filipinos, tourism’s direct gross value added will likely decrease. 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.
The DOT has committed to continue aggressively looking for opportunities in partnership with all tourism stakeholders to sustain the gains our country has made. The agency will intensify the promotion of domestic destinations for local travelers who have decided to postpone or forego international travel for the time being.
Meanwhile, the lockdown imposed by the Chinese government on Wuhan, which is considered the hub of transport and industry for central China, could create some supply chain problems that will affect trade and industry elsewhere. Factories have temporarily ceased operations due to the lockdown. Other factories in China are likewise just restarting operations after the long lunar year holiday. A few have predicted economic disruption on a major scale but at this point it is too early to estimate the full economic impact.
China has been the Philippine’s top trading partner. Last year, more than half of our exports to China were shipments of electronic parts. In the immediate term, the temporary closures of factories in China and possible disruption in global supply chains may cause a temporary, slight decline in our exports, particularly of electronics and auto parts.
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.
The Department of Trade and Industry has committed to work closely with affected Chinese and China-based companies who will be looking to strengthen their operations by adding a production site outside China.
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 stable monetary policy, we expect the economy at large to sustain its momentum.
Rest assured, we are continuously monitoring these developments and will regularly update the legislature. 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. We are standing by our working projection of a GDP growth rate between 6.5 percent and 7.5 percent for 2020.