The Philippine economy will be shielded by robust domestic demand from any global or regional economic impact from the deadly nCoV virus but Philippine Offshore Gaming Operators (Pogo) face downsizing when China keeps its citizens from traveling to prevent the virus’ spread, Malaysian financial giant Maybank said.
Just like the SARS outbreak in 2002-2003, the Philippines and Indonesia “will likely see the least impact, given that they are more domestic-oriented economies and less reliant on tourism receipts,” said Maybank Kim Eng in a Jan. 29 report titled “Wuhan Virus: Anatomy of an Outbreak.”
In the case of the Philippines, tourism receipts accounted for only 2.3 percent of gross domestic product (GDP) or about $7.6 billion in 2018, said the report by Maybank analysts Chua Hak Bin, Lee Ju Ye and Linda Liu.
“Within Asean, we think that Singapore and Thailand will probably be the most affected and will likely see
some growth downgrades,” the report said.
“Malaysia and Vietnam will see a smaller negative impact, while Indonesia and the Philippines will probably be least affected,” it said.
“However, the Philippines may still see some impact given the spillover effects on industries like Pogos, which account for around 10 percent of total office space with employees mostly coming from
China,” the report added.
“A long-term outbound travel ban from China could thwart Pogo expansion plans if they have limited manpower,” it said.
In a separate Jan. 27 report titled “Tension in the air,” Maybank ATR Kim Eng Securities Inc. said China’s travel ban on its citizens due to nCoV “would largely affect the Philippine tourism industry.”
China, the Jan. 27 report said, was the fastest growing source of tourists in the Philippines with a 24 percent annual growth from 2013-2018.
It said Chinese nationals accounted for 22.1 percent of tourists in the Philippines as of end-October 2019. Second are South Koreans.
It said tourism earnings and gross value added contributed 2.3 percent and 12.7 percent to Philippine GDP in 2018.
Maybank said at most risk are companies involved in airport operations, airlines, casinos, property developers and consumer companies.
“Lower tourist arrivals translate into lower hotels and resort occupancy rates,” said the Jan. 27 report.
In the event of a larger outbreak of nCoV, second round effects “could expand to lower foot traffic in public spaces such as malls.”
“Malls comprise 26 percent of total sector revenues,” the report said.
“For now, we see limited direct impact on the consumer names under our coverage as their dependence on Chinese tourist arrivals remains small,” it said.
“In our view, consumer names are more exposed to second-round effects—if the outbreak prolongs,” it added.