Economic managers assure minimalimpact of nCoV on trade, economy

MANILA, Philippines — The impact of the novel coronavirus on the Philippine economy can be expected to be minimal as the effect will be concentrated on inbound tourism, a weaker contributor to economic output compared with other sectors, the National Economic and Development Authority (NEDA) said yesterday.

At the same time, the Department of Trade and Industry (DTI) expects nCoV to have minimal impact on trade as Hubei province, where the virus first emerged, accounts for less than one percent of the country’s total trade with China.

Socioeconomic Planning Secretary Ernesto yesterday acknowledged that among the economic sub-sectors, inbound tourism, which makes up five percent of the country’s gross domestic product (GDP), will be worst hit as the government imposes travel restrictions for China, Hong Kong and Macau.

NEDA’s preliminary estimates show that if the coronavirus contagion persists for one month at the current pace, it will dent about 0.06 percentage point of GDP.

If the spread of the virus extends up to five months, 0.3 percentage point of GDP will be shaved off.

If the present level of contagion lingers on for 11 months, however, as much as 0.7 percentage point of the country’s economic output will be affected.

These estimates were arrived at assuming a 100 percent reduction on the number of tourists coming from China and a 10 percent reduction on the number of tourists coming from other countries.

A full reduction of inbound tourism from China shaves off a quarter of the P450 billion spending of foreign tourists in the country that makes up five percent of GDP.

Another assumption made in coming up with the estimates is that present interventions implemented on curbing the spread of the virus and interventions for the economy remain the same.

“These assumptions are made on the steady state of where we are now,” said Pernia.

Despite the impact on inbound tourism, Pernia said the tourism industry will undertake steps to encourage domestic tourism.

As such, airlines and hotels may offer promotions to encourage more local travellers.

“Domestic tourism is bigger because if you combine the share of inbound tourism and local tourism, the share to GDP is 12.7 percent. So that is more than double foreign tourism,” said Pernia.

“We might be able to make up what we lose in inbound tourism with domestic tourism.”

Trade Secretary Ramon Lopez said even in trade, the economic fallout from the contagion is seen to be measly as Wuhan, the capital of Hubei province, only comprises 0.9 percent of the Philippines’ total trade with China.

“So on the trade side, the effect is very minimal,” he said yesterday.

“There is an impact on the supply chain as our

manufacturers import parts to produce their products from Wuhan or Hubei but of course, when you cannot get your supply from Hubei or Wuhan, you will get from alternative sources so your operations here will not be affected. So that will further minimize the impact,” he added.

In terms of imports, Hubei accounts for only 1.2 percent of imports from China.

Philippine imports from China were valued at $22.56 billion in the January to November period last year.

Hubei’s share in Philippine exports to China is also low, accounting for around 0.5 percent of total.

Philippine exports to China reached $8.79 billion in the January to November period in the previous year.

China’s share to the country’s total trade is around 20 percent, while the country’s total trade is about 15 percent of overall GDP.

Earlier this week, Lopez said he met with manufacturers to ask them about plans on finding alternative sources of materials or parts.

With travel bans being imposed, he said tourism is expected to take a hit from cases of nCoV.

“Main effect is on movement of people, tourism,” he said.

He said domestic tourism could be encouraged however, by reduction of hotel rates and airfares.