Neda: GDP growth may fall below 2020 target if COVID-19 lingers
Economic growth may fall below the government’s 6.5-7.5 percent target for 2020 if the fallout from the COVID-19 disease spreads across the tourism and trade sectors until June, the state planning agency National Economic and Development Authority (Neda) said Monday.
In a presentation before the Senate economic affairs committee, Neda Undersecretary Rosemarie G. Edillon said their latest estimates showed that their year’s gross domestic product growth could shed 0.5-1 percentage point (ppt) equivalent to P93-187 billion in foregone gross value added (GVA), such that GDP expansion could slow to 5.5-6.5 percent.
On the sidelines of the Senate hearing, Edillon told the Inquirer that this updated Neda projection reflected assumptions under which foreign tourist arrivals would continue to decline, even as she noted that the government was moving to offset inbound arrivals with domestic tourists.
“The share of domestic tourism is bigger than that of foreign tourists,” Edillon pointed out.
Neda’s estimated economic impact of COVID-19 showed a decline in inbound tourist arrivals by 1.42 million if the outbreak lingered on until June, which would lead to 30,000 to 60,000 in job losses in the tourism sector alone.
Among foreign tourists, the Chinese accounted for about 22 percent of arrivals, Edillon noted, but Neda’s estimates also considered the partial travel bans imposed on other affected areas such as South Korea—the country’s top source of tourists, as well as China’s special administrative regions Hong Kong and Macau.
Monthly inflation would also increase by 0.1-0.2 ppt due to COVID-19, while the budget deficit could breach the 2020 program of 3.2 percent of GDP to a wider 3.3-3.4 percent, Neda estimates showed.
Edillon said that during a meeting with the business group Philippine Chamber of Commerce and Industry (PCCI) last week, businesses said they still have inventory of about two months to sustain production.
“The problem is if it [COVID-19] will linger, if China will not recover in the next two months,” Edillon warned.
As such, Neda recommended to relax some business and labor regulations to ease the impact on firms, including allowing employees to telecommute or work from home; reducing work hours and days, rotation of workers, and forced leaves; as well as expanding rules on minimum wage exception to cover epidemics, Edillon said.
Also, Edillon urged providing relief to banks and quasi-banks through staggered booking of allowance for credit losses, non-imposition of penalties on legal reserve deficiencies, and non-recognition of certain defaulted accounts as past due.
Edillon also encouraged waiving participation fees for international trade and travel fairs, which the Department of Tourism (DOT) had estimated to cost P11.2 million.
Neda was likewise pushing to allow export-oriented firms to sell “strategic” products to the domestic market in the meantime, but Edillon noted that doing so may entail legislation as exporters’ registration to investment promotion agencies (IPAs) such as the Philippine Economic Zone Authority (Peza) mandated up to 70 percent of output for export, or else they would lose their incentives.
As a form of regulatory relief, airlines sought cancellation of navigational and landing charges as they already incurred P3 billion in losses from refunds to cancelled flights since February.
However, Edillon said the Economic Development Cluster (EDC), which will meet on Tuesday, would first have to consider the impact of suspending such fees on the contracts for some airports built by the private sector using the public-private partnership (PPP) mode.
