THE Department of Finance (DoF) said the government should be ready to implement monetary and fiscal measures to cushion the impact of the novel coronavirus (2019-nCoV) citing a study that pointed out the Philippines’ vulnerability to effects of the outbreak.
“(The government should) continuously monitor developments in trade and tourism (and) be ready to implement monetary and fiscal tools to counter potentially adverse economic fallout,” Finance Secretary Carlos G. Dominguez III told reporters in a Viber message over the weekend.
Last week, the central bank at its first rate-setting meeting this year cut benchmark interest rates by 25 basis points to shield the economy from the effects of the outbreak.
According to the International Monetary Fund (IMF), the Philippines still has space for expansionary macroeconomic and monetary policy to mitigate the possible risks of the outbreak.
“Under these adverse risk scenarios, fiscal stimulus should be prioritized toward public capital and social spending programs,” the IMF said.
Mr. Dominguez also said authorities should stay vigilant in ensuring the biological safety and good health of the population amid the ongoing spread of the virus.
“(There is also a need to) prepare marketing and finance programs to assist industries that may become distressed,” he added.
Mr. Dominguez made the statement in response to an article by the independent think tank ODI, which said the Philippines, along with Sri Lanka and Vietnam, are the top countries likely to be vulnerable to the economic impact of the outbreak as well as the slowdown in China’s economy.
“Much of the outbreak is currently centered around China with the affected areas effectively being under lock-down. This will affect the Chinese economy and beyond. Many countries in South East Asia and Africa are increasingly dependent on economic links with China for their growth and economic transformation,” it said.
According to ODI’s study, “Economic vulnerabilities to health pandemic: which countries are most vulnerable to the impact of coronavirus,” the Philippines and Vietnam will be the most affected by the outbreak through direct health impact and direct flight cancellations.
In terms of country’s exposure to 2019-nCoV through economic channels, Philippines ranked fifth, just behind Maldives and Laos, with Mongolia topping the list.
“Taking these indicators together, we present an overall vulnerability index. Sri Lanka, the Philippines and Vietnam, followed by Kazakhstan, Kenya, Cambodia and Nepal, top this index as the most vulnerable countries in economic terms,” the study read.
According to preliminary estimates by the National Economic and Development Authority (NEDA), a prolonged 2019-nCoV outbreak in the country will largely hurt the tourism sector and might dent the economy by around 0.3% if the effects are felt until June.
The economic impact could further rise to as much as 0.7% of gross domestic product (GDP) if the virus lingers until December.
NEDA Secretary Ernesto M. Pernia said these scenarios considered a 100% reduction in Chinese tourists during and a 10% reduction in other inbound foreign tourists from the baseline during that period.
Central bank governor Benjamin E. Diokno said the bank’s estimates showed the outbreak could have an average impact of 0.3% on GDP growth during the first half, minus 0.1% in the first quarter and minus 0.4% by the second quarter.
Mr. Dominguez has said that the government is maintaining this year’s growth target of 6.5-7.5% despite the virus outbreak and the recent eruption of Taal Volcano.
The World Health Organization has declared the 2019-nCoV a public health emergency of international concern, after it infected more than 20,000 people, mostly in China. — Beatrice M. Laforga