Growth in the time of nCoV

It’s just the second month of the year, and we are already facing uncertainty created by the novel coronavirus as well as the impact of Taal Volcano’s unrest, including the persistent possibility of a powerful lateral eruption or base surge.

The socioeconomic planning secretary is unfazed. Economic growth for 2020, says Secretary Ernesto Pernia, is not going to go lower than the 5.9 percent recorded in 2019 – “nothing lower than 6 percent.”

President Duterte also voiced confidence on Monday night that the novel coronavirus crisis “will just die a natural death.” He didn’t say that he would eat the nCoV like he did with Taal’s ashfall. Maybe it was more difficult to be flippant on a day when China’s markets were hammered and the number of persons under investigation for possible nCoV in the Philippines had jumped from just 36 on Sunday to 80.

The President may consider some circumspection in his comments on this crisis. The disruption to livelihoods and the hassle of having to wear face masks are fueling resentment against government responses to the nCoV contagion.

Cabinet Secretary Karlo Nograles, who faced “The Chiefs” this week on Cignal TV’s One News, said Health Secretary Francisco Duque III has been reporting directly to the President on the nCoV crisis.

There are complaints that Duterte is putting the interests of China ahead of his compatriots. Such sentiments have simmered throughout his presidency, but now I’m hearing them even from a number of his supporters.

His admonition against Pinoy Sinophobia makes sense; my Tsinoy bones feel the xenophobia when I’m in public places. On the other hand, he may also want to consider the argument – posed by Filipinos who resent the racist tag – that they simply have virusphobia, and it’s just coincidental that the origin, the epicenter of the novel coronavirus is China.

Anti-Chinese sentiment, however, is undoubtedly bubbling up to the surface in our country. It is further complicating the continued operations of a sector that the government still hopes will be a major revenue earner: Philippine offshore gaming operators or POGOs. Especially in a year when the crisis in the world’s second largest economy could lead to a global economic slowdown.

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Pernia told The Chiefs last Monday that “personally, I am not excited” about POGOs. The expected taxes from the proliferation of POGOs have yet to materialize. Pernia also said a real estate bubble “is possible” because of the POGOs. 

The administration has yet to come up with a clear policy on POGOs. Pernia stressed that the industry is not a major contributor to gross domestic product. The international travel and tourism sector accounts for 3.5 percent of GDP. But domestic tourism is the bigger revenue earner, and Pernia said this could be stimulated amid the nCoV-related restrictions on foreign travel.

Remittances from overseas Filipino workers account for 10 percent of GDP. Pernia does not see a significant drop in this area because of the nCoV threat. OFWs in turn contribute significantly to the country’s consumption-driven growth.

With the 2020 national budget enacted at the start of the year, Pernia also sees intensified government spending, especially on the Build Build Build infrastructure program. BBB was derailed by the nearly five-month delay in Congress’ passage of the 2019 national appropriation, which lopped off an estimated one point from GDP growth last year, according to Pernia.

Out of 100 mostly high-impact projects under BBB, Pernia said the National Economic and Development Authority, which he heads, has approved 75 for spadework this year. This would become harder by 2021, he stressed, with the approach of an election year.

“We’re now into the homestretch of implementing (projects),” he told us.

Pernia said consumption spending accounts for 68 percent of GDP; government spending, from 15 to 20 percent, and private sector spending on construction and related activities, 27 percent.

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Even in BBB, there are Chinese-related issues. The touted Chinese investments in BBB projects as well as funding assistance have not materialized.

Only one China-funded BBB project is underway: the Chico Dam. A second project, Kaliwa Dam, has yet to get off the ground.

Asked why the Philippines is not getting the expected Chinese official development assistance (ODA), Pernia said, “I understand that’s because they’re short of US dollars.”

He downplayed this as he stressed that the biggest source of ODA for Philippine development projects is Japan, while South Korea-funded projects are noteworthy for the fastest implementation.

The government is also renewing its interest in private-public partnerships as Pernia noted increased interest in the private sector for government infrastructure projects.

Aside from nCoV, there are other headwinds for the year: African swine fever continues to spread, and now there’s the emergence of highly pathogenic avian influenza or H5N1, which has led to the culling of at least 18,000 chickens in China’s Hunan province. The Calabarzon is reeling from the continuing unrest of Taal Volcano. And farmers continue to reel from the rice tariffication program and the consequent plunge in palay prices.

Pernia says the rice farmers would be getting funding assistance as well as support in shifting to high-value rice varieties and other crops.

Despite all the tough challenges, the economic planning chief remains optimistic about higher growth for 2020.

“We have other bigger contributors to GDP,” Pernia said. “I’m not expecting a lower growth rate this year.”