Moody’s sees PH consumer spending taking a hit from coronavirus

The outbreak of the novel coronavirus (nCoV) would have an impact not only on tourism but also consumer spending as Filipinos avoid going out to prevent infection, the financial intelligence arm of Moody’s said Monday (Feb. 10).

“At this stage, the coronavirus looks set to impact the Philippine economy via two main channels,” Moody’s said.

“The first is a drop in arrivals from mainland China, which will hurt its tourism sector. Mainland tourists accounted for 22 percent of arrivals into the Philippines in 2019, while tourism represents around 11 percent of GDP [gross domestic product],” it said in a report.

“The second channel is that the virus outbreak has caused fear and panic globally, and with the Philippines reporting several cases and one fatality, consumption of services will take a hit as locals avoid public places to limit the odds of infection,” Moody’s said.

Based on initial estimates of the state planning agency National Economic and Development Authority (Neda) if the nCoV outbreak lasted for a month, effect on GDP would be 0.6 percent. This was on the assumption that no Chinese tourist arrives because of a travel ban and a 10 percent reduction in tourists from other countries is felt.

If the outbreak doesn’t worsen but lasts until June, the impact on GDP would be lesser at 0.3 percent.

If the crisis persisted until December, however, the Philippine GDP would lose at least 0.7 percent.

Across Asia-Pacific, Moody’s said the tightening restrictions on Chinese travellers across the region “will have rising economic implications on consumption and services.”

It noted that the Bangko Sentral ng Pilipinas (BSP) last week cut the policy rate by 25 basis points to 3.75 percent “to shore up domestic demand amid the coronavirus and the Taal Volcano eruption in January, which damaged some agriculture and temporarily disrupted some factories.”

The Bank of Thailand also last week cut interest rates partly in response to the potential economic impact of the 2019-nCoV outbreak, Moody’s said.

In Hong Kong, nCoV was also expected to have spillover impact on consumption and travel.

The Asian Infrastructure Investment Bank (AIIB) said in a statement that it was “in active discussions with the government of China to strengthen the country’s emergency public health infrastructure.”

“Subject to the approval of its board of directors, AIIB stands ready to support China through public health infrastructure loans to meet the government’s immediate and longer-term public health needs,” the Beijing-based multilateral lender said in a statement.

“As a way to give back to the community where AIIB’s staff live and work, the bank is also matching staff donations to purchase medical equipment to help China control the spread of nCoV,” it added.

“People from over 50 nations work at AIIB and we have all made China our home. With the full impact of this epidemic still unknown, we want to do our part as residents of China to help stop its spread,” the AIIB statement added.

“In line with AIIB’s mission, we will also work with the government of China to identify effective public health infrastructure investments that will prevent the rapid spread of future outbreaks,” AIIB president Jin Liqun said.

Edited by TSB