By Beatrice M. Laforga Reporter
and Luz Wendy T. Noble
PHILIPPINE economic growth could slow this quarter as factory closures in China, which is battling a coronavirus outbreak that has killed hundreds and sickened thousands more, hit the global supply chain, according to Mitsubishi UFJ Group (MUFG) Global Research.
“Growth momentum in the manufacturing sector may slow in the near term as the factory closures in China are expected to affect the supply chain network,” the company said in an e-mailed note.
Finance Secretary Carlos G. Dominguez III said the government would keep its 6.5% to 7.5% growth target this year despite the coronavirus outbreak in China and Taal Volcano’s eruption last month.
“While these developments might slightly restrain our economic expansion, these threats are not enough to force a dramatic reduction in our growth estimates,” he told a Senate hearing on the coronavirus.
The economy grew 5.9% last year, the slowest in eight years and missing the government’s minimum goal of 6%. Lackluster growth of 5.6%, 5.5%, and 6% was posted in the first three quarters after lawmakers failed to approve the national budget on time.
“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,” Mr. Dominguez said.
Electronics export growth could come in at three percent this year, from a preliminary projection of five percent which the Semiconductor and Electronics Industries of the Philippines, Inc. (SEIPI) adopted in a Jan. 29 board meeting, if the widening outbreak is not curbed soon, SEIPI President Danilo C. Lachica said in a mobile phone message.
The Philippine electronics industry exports and imports electronic parts to and from various countries including China. Mr. Lachica said the electronics industry exports 30% of its products to China and Hong Kong. He added that 40% of the industry’s imports are from China, Taiwan and Hong Kong.
Electronic product exports hit $36.48 billion in the 11 months through November last year, up 2.555% annually and accounting for 56.5% of the country’s merchandise exports for that period.
The same period saw sales abroad of semiconductors or component parts reaching $26.77 billion, up 1.864% on the year and making up 73% of electronic products sold overseas and 41.46% of all Philippine goods shipped abroad.
Combined exports from China and Hong Kong accounted for the bulk of total exports in the 11-month period, with 13.6% and 13.5%, respectively, after the United States with 16.3%, preliminary data from the Philippine Statistics Authority (PSA) showed.
MUFG said the Philippine tourism sector would be hit hard by the virus outbreak.
The Philippines has seen an influx of Chinese visitors since President Rodrigo R. Duterte started boosting trade and investment ties with China.
“The main driving force of growth in the first half of 2020 would then be construction, bolstered by the government’s massive spending on infrastructure,” according to the note.
Mr. Dominguez said the tourism sector could be hit amid a travel ban on foreigners from China, Hong Kong, and Macau.
He said yearly tourist arrivals dropped by 1.3% to 1.9 million when the severe acute respiratory syndrome (SARS) outbreak hit in 2003.
The number rebounded the following year, with tourist arrivals surging by 20% to 2.3 million in 2004, he added.
Security Bank Corp. Chief Economist Robert Dan J. Roces said the Philippines has “lower trade risks compared with our neighbors.”
“In terms of regional supply chains, Hong Kong, South Korea and Vietnam are the most exposed,” he said in a separate note.
Mr. Roces said gross domestic product (GDP) could lose $300 million or 0.1% for every quarter from tourism and external trade losses alone. Other vulnerable sectors include airlines, gaming, lodging and leisure, he added.
Meanwhile, ING NV-Manila Senior Economist Nicholas Antonio T. Mapa said consumption might be affected as Filipinos cut mall visits because of the coronavirus scare.
“Fewer trips to the malls or shorter stays at shopping centers mean less spending as window shopping is avoided and cups of coffee are now for takeout,” he said in an e-mailed note.
“An unconscious or conscious shift in spending patterns may result in slightly weaker consumption followed by a lackadaisical recovery in investment as consumers and corporates await more clarity on the developments related to the bug,” he added.
On Tuesday, the second coronavirus death outside China was reported in Hong Kong, after the first one in the Philippines.
The outbreak has killed more than 400 people and infected more than 20,000 globally, mostly in China, Reuters reported, citing data from the World Health Organization. — with Jenina P. Ibañez