The economy still has the potential to grow above 6 percent this year provided the import delays and tourism losses due to the coronavirus disease outbreak do not extend to the first half, Philippine National Bank said Monday.
The PNB Macro Alert report said GDP growth this year could settle within the 6.2-percent to 6.4-percent range, although a bit slower compared to its earlier forecast of 6.6 percent made before the spread of the dreaded COVID-19 that originated in Wuhan, China.
“With reports of local businesses raising likelihood of production/investment delays due to import delays from China [ranging from solar panels, telecoms equipment, etc.], the COVID-19 supply shock expanded its coverage from tourism and services-related industries, to the industrial sector,” PNB said.
It said non-oil imports from China that fed industries catering to global or local demand comprised the transmission channel of the supply shock. About 23 percent of the country’s imports (25.9 percent share of non-oil imports) were sourced from China in 2019.
Using production data from the Asian Development Bank’s input-output tables (2017), PNB estimates a potential, annual production (not value added) loss of $12.2 billion (2 percent of 2017 production) “assuming we miss out on 100 percent of China imports (non-oil) and limited substitutes are found.”
PNB said the opportunity loss estimate was modest and could be made up in succeeding quarters post-COVID. The bank said unlike a negative shock due to natural disasters, recovery from COVID-19 downside risks would not require infrastructure repair nor capacity restoration.
“Assuming the import delays and tourism losses are isolated in the first quarter of 2020 and do not extend to first half of 2020, the full year 2020 GDP growth can still probe 6.2 percent-6.4 percent in our view,” it said.
PNB said the large share of non-oil imports to intermediate consumption and the hefty contribution of intermediate consumption to output were identified as key production parameters that could potentially handicap a sector’s production when subject to abrupt import constraints.