THE eruption of Taal Volcano and the outbreak of the coronavirus disease 2019 (COVID-19) may shave off nearly a percentage point of GDP growth in the January-to-March period, a private think tank said.
And, briefing senators on Monday, officials of the National Economic and Development Authority (Neda) estimated that the economy could lose anywhere from P93 billion to P187 billion in gross value added (GVA)—a loss that only accounts for the impact of COVID-19.
In its latest Market Call report, First Metro Investment Corp. and University of Asia and the Pacific (FMIC-UA&P) Capital Markets Research said the impact of the two events may reduce GDP growth by 0.4 to 0.8 percentage point in the first quarter.
“The negative impact of the Taal Volcano eruption and Metro Manila consumers avoiding malls with the lingering COVID-19 impact on tourism may only result in a 0.4-percent to 0.8-percent reduction in GDP growth in the first quarter, but still robust enough to be a top performer in Asean 6,” said FMIC-UA&P.
Given government’s expectations that economic expansion could be slower in the first quarter, the local think tank said the Bangko Sentral ng Pilipinas (BSP) may consider cutting interest rates by another 25 basis points this month. The BSP has already cut its policy rates by 25 basis points last month to 3.75 percent to spur economic growth.
However, the reduction in interest rates failed to accelerate inflation, due to the “free fall of crude oil prices.” The think tank said January inflation pegged at 2.9 percent may already be the peak for the first semester of the year.
“The spate of negative news—accelerating inflation rate in January, Taal volcano eruption that displaced some 100,000 persons in the area, and fast-spreading COVID-19 around the globe—should not make us oblivious of the solid fundamentals of the economy,” it said.
Neda’s estimate
National Economic and Development Authority (Neda) Undersecretary for Policy and Planning Rosemarie G. Edillon said the economy stands to lose P93 billion to P187 billion in gross value added (GVA) due to COVID-19.
In her presentation at the Senate on Monday morning, Edillon said the estimate is equivalent to a reduction of 0.5 percetange points to 1 percentage point from GDP growth.
Edillon told the BusinessMirror in a phone interview that this is the outlook for the impact of COVID-19 on the economy for the whole of 2020. Neda had initially projected that travel bans and lower tourism revenues would slash GDP growth by 0.3 percentage points to 0.7 percentage points.
The new estimates are premised a two-month trade disruption; a 10-percent decline in tourist arrivals from other countries; the travel ban on tourists from China; and partial travel ban on tourists from South Korea.
Edillon said COVID-19 will also reduce jobs by 30,000 to 60,000 if the outbreak lasts until June. However, she said job losses could reach 93,000 if the problem persists until the end of the year.
She said COVID-19 could cut the country’s tourist arrivals by 1.42 million; increase inflation by 0.1 percentage points to 0.2 percentage points this year; and swell the budget deficit to as much as 3.4 percent of GDP.
“[On concerns that demand is slowing] it really depends on the next couple of weeks,” said Edillon. “[On tourism] we need to be more aggressive on domestic tourism.”
Last week, Neda Assistant Secretary for Policy and Planning Carlos Bernardo O. Abad Santos said the ill effects of COVID-19 should be addressed in three phases—safety for all; regaining consumer confidence; and building back better.
The only problem, he said, is that there is no timeline or timetable on when these can start or end given the volatile situation.
“We still don’t know what’s going to happen. There are a lot of uncertainties,” Abad Santos told the BusinessMirror. “There is no timetable for this. At this point, we still do not know when it [outbreaks] will plateau.”
He said “safety first” means treating COVID-19 as a public health issue, prioritizing prevention and keeping all Filipinos “out of harm’s way.” This means lowering Filipinos’ exposure to the disease by developing protocols in reporting and encouraging proper hygiene.
The Neda official said this also means reducing gatherings; imposing “regulatory forbearance mechanisms” to prevent the further spread of the disease; and extending worker benefits that will help them cope with the ill effects of the disease.
Abad Santos said institutions, such as the Social Security System, should be ready to assist members who will lose their jobs.
The second phase involves recovery and boosting business and consumer confidence in the economy. The priority is to convince businesses and individual consumers to resume their regular activities.
The third and last phase calls for learning the lessons of the COVID-19 outbreak.