The country’s economic managers are set to meet on Tuesday to look into the potential impact of the coronavirus 2019 (COVID-19) not just on tourism but also on the construction sector.
The Economic Development Cluster (EDC) meeting will be held after the Department of Health raised the COVID-19 Alert System to Code Red Sublevel 1 over the weekend after Manila confirmed its sixth case of COVID-19.
Finance Secretary Carlos G. Dominguez III told reporters that although it is clear that the tourism sector will take a hit from the outbreak of the virus, the government has yet to see its impact on other industries.
“In fact, we [economic managers] are meeting on Tuesday with the Economic Development [Cluster] to really take a look at [COVID-19’s] potential impact on different sectors in our society, including tourism industry, construction,” said Dominguez.
“Right now, what we are seeing is that COVID-19’s impact is essentially on tourism and that’s very clear. What is not so clear is its impact on the productive capacity of our trading partners, supply chain and demand [for] our products,” he added.
While a lot of construction materials come from China, such as steel, Bases Conversion and Development Authority chief and Presidential Adviser for Flagship Programs and Projects Vivencio B. Dizon said the government has not seen any disruption in the supply chain which could delay big-ticket infrastructure projects.
Dizon said he is hopeful that the spread of the virus will not affect the construction of the government’s infrastructure projects. The government is targeting to finish half of 100 flagship projects by 2022.
“Right now we’re not seeing any effects yet, but we have to closely monitor that and then see if its effects on China, which supplies all of these construction materials, heavy equipment, for the entire world will be affected by this,” said Dizon.
“In fact, we heard that even areas like Shanghai and some parts proximate to Hubei province are really going back to normal. So hopefully it will not, but you know we’re still looking at and discussing with our contractors if there are any effects,” he added.
According to the Global Steel Trade Monitor, the Philippines imported 9.1 million metric tons of steel in 2018, 11 percent higher than the 8.1 MMT recorded in 2017.
The country imports huge volumes of steel from China, Russia and Japan.
Overall, the country also purchases steel from over 50 countries and territories.
Dominguez said the effect of the virus on the supply chain, particularly on construction, may not be immediately felt because of the inventory cycle observed in the Philippines.
“Let’s say they keep three months inventory, right? The slowdown started in, let’s say mid-February, right? So if they have three months’ inventory, it’s only in May that you’ll see a slowdown, if there is a slowdown at all,” he said.
Ahead of the Development Budget Coordination Committee meeting this month for the review of the government’s macroeconomic assumptions, the National Economic and Development Authority earlier said the reduction in the country’s GDP growth could reach 0.3 percentage point if the impact of the virus lasts for six months and 1 percentage point in GDP growth if the virus infects the economy for the whole year.
This means that if the government expects a growth of 6.5 percent to 7.5 percent this year, a full percentage reduction will cut GDP growth to 5.5 percent to 6.5 percent in 2020.