The spread of coronavirus disease 2019 in Metro Manila compelled the National Economic and Development Authority to reduce the 2020 gross domestic product forecast by 1 percentage point from a range of 6.5 percent to 7.5 percent to a band of 5.5 percent to 6.5 percent.
NEDA Undersecretary Rosemarie Edillon said a slower economic growth this year was likely as COVID-19 which originated in Wuhan, China and claimed the lives of more than 3,000 individuals globally would affect the pillars of strength of the domestic economy.
“We are looking at 5.5 to 6.5 percent for the year,” she said in a Senate hearing Monday.
ING Bank Manila senior economist Nicholas Mapa said with the brunt of the COVID-19 virus yet to hit Philippine shores, economic managers should trim growth expectations given the projected hit on the recently burgeoning tourism industry.
“Tourism Secretary Romulo-Puyat had ambitious plans for the sector but COVID-19 will likely change the global scenario as global travel grinds to a half with travel bans in place and general anxiety and fear over catching the virus persuades would be travelers to stay at home,” Mapa said.
The Department of Tourism said earlier that up to 50,000 jobs were at risk in the sector that employs roughly 5.4 million of the labor force.
Mapa said the Philippines welcomed 8.26 million foreign visitors in 2019 with tourist receipts hitting $9.31 billion, translating into $128 spent by each tourist based on the average number of days spent in the country.
He said visitors from South Korea, China and Japan were the top sources of foreign visitors and the Philippines would not likely receive many visitors from these jurisdictions in the near term, or until COVID-19 was successfully contained.
“But despite the projected loss of roughly $9.3 billion worth of foreign currency inflows, why isn’t the peso reacting? The answer could be that the projected loss of tourist receipts will be offset by the expected foreign exchange outflow from Filipino jetsetters,” Mapa said.
GDP grew 5.9 percent in 2019, missing the official target range of 6 percent to 7 percent as it was pulled down by the delay in the approval of the P3.7-trillion national budget.
The government’s economic team is scheduled to meet Tuesday to assess the latest situation and developments that might impact economic growth.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno did not rule out the possibility of having bigger cuts in interest rates this year as COVID-19 threatens economic expansion.
Diokno said further rate cuts could happen aside from his earlier commitment of 50-basis-point reduction for 2020.
Analysts and economists said the spread of the disease could prompt central banks around the world to cut interest rates to boost economic growth.
Fitch Solutions Macro Research, a unit of Fitch Group, earlier reduced its growth forecast for the Philippines this year to 6 percent from an earlier estimate of 6.3 percent, taking into account the impact of COVID-19.
It said the exports sector, specifically tourism, would likely see intense headwinds from the outbreak, while infrastructure projects could face delays and households receive weaker remittance inflows.
Fitch Solutions said the major risk to its view would be a sudden surge in the number of domestic cases in the Philippines or a more prolonged impact on external demand.