The Philippine economy may grow by a meager 4.7 percent year-on-year in the first quarter due to the Luzon-wide quarantine imposed by the government to contain the new coronavirus pandemic, according to economists from Union Bank of the Philippines.
For the full year, Philippine gross domestic product (GDP) is now seen to grow by only 5.4 percent, a further downgrade from Unionbank’s previous forecast of 6.1 percent as the “enhanced community quarantine” locked down 73 percent of the economy and restricted the movement of people.
These forecasts are a far cry from the over 6-percent growth rate trend seen by the Philippines in the last decade. After posting an eight-year low of 5.9 percent in 2019, mostly due to the delay in the legislation of the national budget, the
government had aimed for a faster growth of 6.5-7.5 percent this year.
“For the economy to continuously run, the movement of people and goods should not be hampered. Thus, the economic impact on these particular regions will be very significant,” said a March 17 research note written by Unionbank chief economist Ruben Carlo Asuncion and economic research officer Katrina Joy Javier.
If the quarantine were to be extended beyond the April 12 target, the economists said second-quarter GDP growth could also turn out lower than previously expected, further gnawing on full-year growth.
If the containment effort at the local level would succeed by April 12 alongside parallel global efforts, Unionbank sees a slight economic recovery by the third quarter and a more robust expansion in the fourth quarter.
The National Capital Region accounts for 36 percent of total GDP. If the whole of Luzon island is considered, 73 percent of the Philippine economy is hampered by the quarantine, according to the economists.
They said initial assessment of the economic impact of the COVID-19 pandemic point to both tourism and trade-related businesses. They noted that a major part of the Philippine economy was the service sector with a share of 49 percent, composed of services-related subsectors directly affected by the COVID-19 crisis, like tourism, transport, airlines, real estate, retail and other services.
The new coronavirus is causing the disease called COVID-19. As of press time, Philippine cases have reached 202 and the death toll at 17.
“With the [quarantine], local manufacturing companies may further be hampered, as these firms are asked to limit activity to be able to implement significant social distancing. The [quarantine] will also impact the construction sector, as the ‘Build, Build, Build’ program is expected to be disrupted,” the research said.
“Overall, by industry origin, at most, 74 percent (service, manufacturing and construction) of the economy will experience a significant slowdown.”
With the COVID-19 spread, the continued contribution of remittances—a significant part of the economy—could also be affected, the research added.
The economists noted countries with the highest number of confirmed COVID-19 infection constituted a total of almost 50 percent of remittance inflows into the country.
“This is a significant portion of overall levels and future remittance inflows may be affected consequently for the coming months,” the research said.