SOCIOECONOMIC Secretary Ernesto M. Pernia on Monday said the economy could take an even bigger hit if the coronavirus disease 2019 (COVID-19) outbreak persists until yearend, estimating a one-percentage point reduction in 2020 gross domestic product (GDP) growth.
On Monday, Mr. Pernia told reporters that the National Economic and Development Authority (NEDA) revised the preliminary estimates of the COVID-19 outbreak’s impact on the economy. Earlier this month, NEDA said it estimated a 0.7 percentage point loss in GDP growth if the outbreak continues until end-2020.
The NEDA chief said the assessments were made based on a scenario where inbound Chinese tourists will be cut by 100% and foreign tourist arrivals will be reduced by 10%, while trade will be “drastically reduced.”
“The impact of travel and tourism as well as trade, assuming that travel and tourism will go down to zero from China and 10% reduction from other countries, and trade will also be drastically reduced, our preliminary estimate is that, just the direct effect, 0.3 percentage point to one (percentage point)… of percentage point of GDP growth,” Mr. Pernia said on the sidelines of an event in Pasay City on Monday.
“That’s direct effect eh, we haven’t taken into account the indirect effect and the multiplier effects, maraming (there are many) multiplier eh, that could still go up.”
NEDA earlier estimated that 0.3% could be shaved off GDP growth this year if the COVID-19 outbreak lasts until June. This only took into account the impact on travel and tourism sector, not the effect on imports and export.
Mr. Pernia said the Development Budget Coordination Committee (DBCC) will meet “soon” to review its macroeconomic assumptions and projections.
The Philippine government is targeting 6.5-7.5% GDP growth this year.
To offset the negative impact of COVID-19, the NEDA chief said the government could increase its spending and accommodate a wider deficit of 3.3-3.5% of GDP.
Asked if higher state spending can offset the negative impact of the virus to the economy, Mr. Pernia said: “To some extent but not entirely.”
To accommodate wider deficit, the government will have to borrow more to offset possible lower revenue collections due to the impact of the virus.
“Our revenue from (the Bureau of) Customs will also go down so we will have less fiscal space to help. Well, I don’t know how it’s going to be done when it comes to cash transfers. Mahirap ang cash transfers (cash transfers are difficult). We will try to scale up domestic tourism (since it) has a higher impact,” Mr. Pernia said when asked on possible plans to help affected sector.
Meanwhile, Philippine National Bank’s (PNB) research unit said the Philippines could suffer a “modest losses” worth $12.2 billion or equivalent to two percent of total production in 2017 due to disruptions in global supply chains by the COVID-19.
“Using production data from the ADB’s input-output tables (2017), we estimate a potential, annual production (not value added) loss of $12.2 billion (2% of 2017 production) assuming we miss out on 100% of China imports (non-oil) and limited substitutes are found,” PNB Research said in a report released on Monday.
PNB Research said the estimated opportunity loss is “modest” and could be offset once COVID-19 abates.
“Unlike a negative shock due to natural disasters, recovery from COVID-19 downside risks does not require infrastructure repair nor capacity restoration,” it added.
PNB Research slashed its growth outlook for the economy this year to 6.2-6.4%, from the 6.6% projection it gave before the COVID-19 outbreak started. — Beatrice M. Laforga