Global debt watcher Moody’s Investors Service said the spread of the 2019 novel coronavirus disease will weaken the Philippines’ economic growth and employment outlook this year.
Moody’s said in a report that economies that rely on travel and tourism―like the Philippines―would be badly affected by the viral disease.
“As travel demand softens due to disruptions from the outbreak, growth in economies that are highly reliant on foreign visitors―those from China in particular―will weaken,” Moody’s said.
“Such economies include Thailand and the Philippines, where the direct contribution of travel and tourism industries is more significant as a share of GDP. Employment conditions will also weaken because these industries are large employers in APAC [Asia-Pacific] countries,” Moody’s said.
Moody’s also said the economic slowdown and deterioration of employment conditions would lead to increases in loan losses for banks, with the latter hurting quality of consumer loans in particular. This in turn will drive credit costs and weaken banks’ profitability.
“Exposures to small and medium-sized enterprises related to tourism and travel will be most at risk because these borrowers have lower financial flexibility compared to the more diversified corporate,” Moody’s said.
Oxford Economics, an independent global advisory firm, also listed the Philippines as one of the economies in the region that would be affected by COVID-10 because its tourism industry relies on Chinese tourists.
Oxford said in a separate report that weaker Chinese imports and tourism, and disruption to global supply chains, would take a toll on the rest of the world, particularly the Asia-Pacific region.
“Economies where travel and tourism accounts for a significant share of GDP and which are more reliant on Chinese tourists are likely to be impacted by this crisis the most, include Hong Kong, China; Macao, China; Thailand; Cambodia; and the Philippines,” Oxford said.
It said China’s outbound travel grew steadily over the past two decades, with its significance as a tourism source market increasing substantially since the previous SARS outbreak in 2003.
Data showed there were more than 73 million departures from China last year, roughly a tenfold increase from the departure levels in 1999. As a share of global departures, China accounted for 6.9 percent of all departures in 2019, with only Germany and the United States accounting for a higher share of global departures.
The International Monetary Fund also said an outbreak of COVID-19 would have a negative impact on the Philippine economy this year.
IMF resident representative to the Philippines Yongzheng Yang said in a news briefing at the Bangko Sentral ng Pilipinas that the spread of the dreaded disease had caused a lot of anxieties and travel restrictions that could heavily impact the tourism industry, which is one of the strengths of the domestic economy.
“It looks that way... We do expect a negative impact to the Philippines due to the outbreak,” Yang said.
“China is one of the largest sources of tourists [for the Philippines],” the IMF official said.
The IMF was expecting the Philippine economy to grow 6.3 percent in 2020.