By Bernadette D. Nicolas & Samuel P. Medenilla
THE Philippines is one of the countries most at risk of suffering the economic impacts from the novel coronavirus (2019-nCoV) outbreak and a slowdown in the Chinese economy, according to a study by an independent global think tank.
At the same time, less imports coming from Wuhan—the epicenter of the nCoV—may also make a dent on government’s revenue collection, Finance Secretary Carlos G. Dominguez III said.
London-based think tank Overseas Development Institute (ODI) developed a vulnerability index to quantify which low- and middle-income countries are most vulnerable based on three main impact channels: health and connectivity; economic links with China and global integration; and resilience or the country’s ability to contain the virus and to do something about the potential effects.
“Taking these indicators together, we present an overall vulnerability index. Sri Lanka, Philippines and Vietnam, followed by Kazakhstan, Kenya, Cambodia and Nepal, top this index as the most vulnerable countries in economic terms,” ODI said in its paper, titled “Economic Vulnerabilities to Health Pandemics: Which Countries Are Most Vulnerable to the Impact of Coronavirus” by Sherillyn Raga and Dirk Willem te Velde.
The overall vulnerability of a country to the economic shock that emerged as a result of the nCoV can be described as a combination of exposure to China through trade, finance and migration linkages, and indirect exposure and resilience.
The Philippines and Vietnam are the most affected in terms of visible health impact and direct flight cancellations. They are also among the Asian countries that are most exposed to the coronavirus through economic channels, considering the significant percentage of these countries’ total exports to China.
“The economic impact of the coronavirus outbreak will be mostly felt by countries with close links to China either through trade, investment or the movement of people. Mongolia, Cambodia and Lao [PDR] are the most exposed Asian countries, followed by Myanmar, the Philippines and Vietnam,” ODI said. “The majority of these countries export more than one-sixth of their total exports to China—and in some cases 90 percent.”
How PHL can cope
Since the country was mentioned as one of the top countries at risk, Dominguez said in a Viber message to reporters that the country must maintain a vigilant stance to assure biological safety and good health of the population. It must also be ready to implement monetary and fiscal tools to counter potentially adverse economic fallout.
Aside from this, Dominguez said the country must also continuously monitor developments of trade and tourism, and prepare marketing and finance programs to assist industries that may become distressed.
For its part, ODI said the coronavirus outbreak reminds countries of the importance of diversifying export partners and funding sources beyond China.
“Countries should continue to lower economic exposure and increase resilience to the outbreak moving forward. Economic vulnerability to external shocks stems from heavy exposure to just one country or sectoral activity,” Raga said.
Meanwhile, Dominguez said revenue collection of the country can also be affected with less imports coming from Wuhan, China.
Preliminary estimates by the National Economic and Development Authority (Neda) released on Friday showed a 0.3-percentage-point reduction in the country’s GDP growth if nCoV lasts up to June.
“The estimates I have seen is that if it really turns out bad, we would probably see a hit of about three-tenths of 1 percent of our GDP growth. But again, we are not teetering at the edge of bankruptcy. We have a very resilient economy,” he told reporters on Friday.
Aside from tourism, Dominguez earlier said the country’s exports could also suffer a temporary, slight decline due to the temporary closures of factories in China, and possible disruption in global supply chains because of the nCoV outbreak.
“We will probably see a hit in some manufacturing especially those manufacturers who export to the Wuhan area. Maybe the factories are going to close. We don’t know how much of the factories there are really closing because that will affect sales. We might have some less imports from the Wuhan area so that will affect our revenues too,” he said.
For his part, Customs Commissioner Rey Leonardo Guerrero also said they have already received reports from some importers that they could not ship exports from China going to the Philippines because of lack of manpower.
“You have to remember, this February we were experiencing the effects of the Chinese New Year. So we were told that after the Chinese New Year, people from China should be reporting for work already. But because of the nCoV, some had to extend their vacation for another 10 days,” Guerrero explained.
In 2018, merchandise trade with Beijing jumped 21 percent to $30.83 billion from $25.48 billion in 2017, making it the country’s largest trading partner.
The virus has so far killed more than 800 people worldwide and infected more than 37,500, according to international reports.