THE Philippines may lose up to $1.939 billion in gross domestic product (GDP) due to the coronavirus disease (COVID-19) outbreak, the Asian Development Bank (ADB) said on Friday.
The ADB released the study titled “The Economic Impact of the COVID-19 Outbreak on Developing Asia” that showed best-case, moderate-case and worse-case scenarios for member-countries that are grappling with the spread of the COVID-19.
“The ongoing COVID-19 outbreak affects the (China) and other developing Asian economies through numerous channels, including sharp declines in domestic demand, lower tourism and business travel, trade and production linkages, supply disruptions, and health effects,” the ADB said.
With the Philippines’ 2018 GDP of $330.91 billion as the basis, ADB said the Philippines may lose $1.93 billion in the worse-case scenario. This includes losses of $592 million in hotels and other tourism-related sector; $465 million in trade, and $414 million in transport services.
For the “worse case” scenario, the ADB expects restrictive policies such as travel bans to last for six months, coupled with two-percentage point drop for both China’s consumption and investment growth.
In the best-case scenario, the Philippine economy will face $669 million in GDP losses. The ADB study’s “best case” scenario is when travel bans and sharp decline in local demand will only last for two months starting late January and there is a moderate and short-lived decline in China’s consumption growth.
In a moderate-case scenario where travel bans start easing within three months, the Philippines will face $990 million in GDP loss.
A hypothetical “worst-case” scenario, where a significant outbreak occurs, would mean GDP losses of as much as $5.51 billion for the Philippines, the ADB said.
In the study, the ADB said member-countries that will be significantly affected by the COVID-19 outbreak are “those with strong trade and production linkages with China.”
“Other developing Asian economies such as Hong Kong, China; Mongolia; the Philippines; Singapore; Taipei,China; and Viet Nam will be materially affected by the COVID-19 outbreak. Many of these economies see a significant share of tourists from (China) and are affected through that channel as well,” it said.
In a moderate-case scenario, the ADB estimated the overall impact of COVID-19 on the Philippines was at 0.3% of GDP.
Many developing Asian countries will see a sharp decline in tourist arrivals and revenues, due to the numerous travel bans and precautionary behavior of many people.
The ADB said the Philippines is seen to lose tourism revenues of at least $801.4 million or equivalent to 0.24% of GDP in the “best case” scenario. For the “worse case” scenario, the Philippines may lose to $2.25 billion or 0.68% of GDP in tourism revenues.
A moderate scenario showed the Philippine tourism sector losing revenues of $1.16 billion or equivalent to 0.35% of GDP.
At the same time, the ADB said the outbreak may cut global GDP by 0.1 to 0.4%, with financial losses seen to hit between $77 billion and $347 billion.
Th ADB said China’s economic growth could be reduced by 0.3% to 1.7% this year. For developing Asia, excluding China, economic growth could be cut by 0.2 to 0.5%.
The Philippine government, through the Department of Finance, is considering to avail loan packages from multilateral lenders to finance its efforts in containing the spread of the disease.
CUT IN GROWTH FORECAST
Meanwhile, S&P Global Ratings has lowered its Philippine growth forecast for 2020, as it factored in wider losses for Asia-Pacific economies amid the prolonged spread of the COVID-19.
In a note sent to reporters on Friday, S&P again trimmed its GDP growth forecast for the country to 5.8% from the already lowered 6.1% it gave earlier in February.
If realized, S&P’s outlook is even lower than the 5.9% growth the Philippines recorded in 2019, and also below the government’s 6.5% to 7.5% target this year.
“At face value, emerging markets such as Indonesia, Malaysia, the Philippines, and India appear somewhat insulated. Exposure to China varies but the dependence on large people flows and supply chains is quite low,” S&P said.
While there are few reported cases in the Philippines and other emerging markets, S&P said this is “likely due, in part, to minimal testing.”
“While this may limit the immediate impact on households and firms, it will do little to inhibit the spread of the virus where it is present. In turn, this could at some point have substantial supply-side effects if a large share of the workforce either falls ill or needs to stay at home to care for sick relatives. Weak healthcare infrastructure will make it hard to arrest spread and keep case fatality rates low, and this could have damaging effects on household and business confidence,” the credit rater said.
The Philippines reported two new coronavirus cases, including a 62-year-old Filipino male who did not travel outside the country. This brought the total confirmed cases in the country to five.
S&P said it also considered the possibility of more policy easing within the region as the virus drags on.
“Risks remain on the downside and are non-linear for Asia’s emerging markets that face healthcare constraints and tighter financial conditions,” the global debt watcher said.
MORE PAIN FOR ASIA-PACIFIC
The coronavirus outbreak could knock $211 billion off the combined economies of the Asia-Pacific, with Japan, Hong Kong, Singapore and Australia among the most exposed, S&P said.
S&P cut its 2020 growth forecast for China to 4.8% from previous estimate of 5.7%. It forecast Australian growth to slow sharply to 1.2% from an already below-trend 2.2% in 2019. Japan would take 0.5 percentage point hit and Korea a 1 percentage point knock.
“The balance of risks remains to the downside due to local transmission, including in economies with low reported cases, secondary transmissions in China as people return to work and tighter financial conditions,” S&P said in a report.
In other forecasts, Hong Kong’s economy would likely contract by -0.8% in 2020, Singapore’s would flat line, and Thailand’s expansion likely slow to 1.6%.
The coronavirus epidemic, which emanated from China’s Hubei province, has claimed more than 3,000 lives worldwide in less than three months, prompting monetary policy easings in major economies including the United States. — B.M.Laforga and Luz Wendy T. Noble with Reuters