The Coronavirus outbreak is first a human crisis before an economic one. According to Johns Hopkins University, more than 2.5 million people tested positive for COVID-19, and above 188,846 deaths have been reported globally. The Philippines has one of the highest numbers of COVID-19 cases in Southeast Asia with over 6981 and the number of deaths at 462.
The outbreak has crippled the economy as economic activities dropped, strict social distancing measures are imposed by countries to adhere to the recommendations by the World Health Organization and other public health authorities around the world.
Impact on the Philippine Economy
Due to the economic fallout from the coronavirus pandemic, it has been predicted that as many as 1.2 million Filipinos could be unemployed. The Gross Domestic Product (GDP) growth of the Philippines that has averaged around 6 percent annually for the past decade is expected to contract this year.
Primary economic growth drivers like consumption, tourism, and trade are impacted as the lockdown measures and strict travel restrictions remain in a bid to flatten the curve.
In March, the Philippines became the first country in the world to temporarily shut down its financial markets in response to the coronavirus outbreak. When the markets reopened after two days, the Philippines Stock Exchange index reported its biggest intraday-loss in 33 years. A 24% drop leading to a loss of 40% for the month.
Risk-averse foreign investors were quick to leave the market and sold over $480.5 million worth of local stock, the fastest pullout in Bloomberg’s tracking history of the data since 1999.
The government had earlier set a 6.5 % to 7.5% growth target for this year. Due to the adverse impact of the coronavirus outbreak, the growth is estimated to between -0.6% to +4.3% in the absence of mitigating measures.
Coronavirus Impact on Trade
The Coronavirus pandemic has disrupted trade across the globe. Especially for a country like the Philippines which is highly dependent on China.
China is the top trading partner of the Philippines with an estimate of 18.8% of the total trade as per the Philippine Statistics Authority (PSA). China is also the biggest importer for the country as 22.9% of total export went to China in November 2019. And the Philippines imported roughly 20% of goods from China. These numbers have fallen sharply and it is not likely to improve until the Q1 of 2021.
Effect of Coronavirus On Tourism
Tourism is one of the main economic drivers of the Philippine economy. In 2018, its tourism receipts in percent of total exports were high compared to some other neighboring Asian countries.
The travel and tourism sector contributed $82 billion to Philippine’s economy or nearly 25 percent share to total GDP in 2018, according to the World Travel and Tourism Council (WTTC) report.
The Philippines' tourism revenue alone was USD 9.31 billion in 2019, the Department of Tourism (DOT). Aside from all-time high earnings, the Philippines also achieved its targeted 8.2 million international arrivals.
Border closure, strict travel restrictions, the ban on airlines, together with other containment and mitigation measures in the aftermath of the outbreak, has been a major blow to the industry.
Other businesses affected by the Coronavirus Outbreak
Businesses need Government intervention to weather through the economic crisis, both the big business to small business. 1.2 million Filipinos could lose their jobs due to the pandemic.
Government measures to save the Philippine Economy
Banking and Coronavirus
As people are observing strict quarantine measures and governments and banks are advising consumers to move to online banking, we have seen a rise in contactless payments.
Remittance into the Philippines and Coronavirus
Remittances received in January 2020 was $2.94 billion, an increase from $2.75 billion achieved in January last year. However, as the economic activity froze further to contain the coronavirus outbreak, an unprecedented amount of job loss around the world has spiked the unemployment rate overall.
More than 10 million Overseas Filipino workers or about 10% of the population send money home. Remittance to the Philippines accounts for 10% of the GDP. The growth in the remittance is down to 2% than the previously projected 3% for 2020.
Recovery of the Economy
JPMorgan has downgraded the 2020 growth forecast for the Philippines to 0.9% from 2.1%. The Philippine economy has shown to be resilient in the past despite extreme volatility. The resurgence of domestic demand, an increase in infrastructure spending, and consumption will drive the recovery, though the markets might take longer to recover. The biggest concern however for the Philippines is when they can reopen the economy and start the economic activity. In the words of Carlos Dominguez, the Finance Secretary, “We all know it’s going to have to be a balance between health and profits.”