The World Health Organization (WHO) has declared the COVID-19 outbreak a public health emergency of international concern. China has reported 80,430 cases and 3,013 total deaths as of March 5, 2020. The outbreak has since spread to several countries in Asia and the West. The outbreak is also starting to weigh on the global economy and is expected to heavily impact financial markets.
Although economists say the current level of disruption is manageable, the economic damage is expected to increase rapidly if the virus continues to spread. Businesses around the world are already dealing with lost revenue and disrupted supply chains due to China’s factory shutdowns, city lockdowns and travel restrictions implemented in other countries.
In the Philippines, one of the high-risk countries, the ongoing coronavirus impact is expected to result in a subdued growth for the 2020 economy.
Impact on Trade
According to the Philippine Statistics Authority (PSA), China was the Philippines’ top source of imported goods and third-biggest export destination. From January to November 2019, as much as $22.6 billion worth of imports came from China. Over the same period, China also bought $8.8 billion or 13.6% of Philippine exports.
The temporary closures of factories and possible disruption in global supply chains may immediately cause a slight decline in exports, particularly of electronics and auto parts. The Philippines will need to expand its array of trade partners and vigorously boost export drive.
As for the silver lining, China would likely want to increase their exports among measures to boost the economy. Hence, imports from them would continue.
Impact on Tourism
The contagion has already hit global travel and tourism. In the Philippines, the industry is a major contributor in the economy and Chinese account for majority of the tourist population.
During the first 10 months of 2019, a total of 1.49 million Chinese tourists visited the Philippines, according to the Department of Tourism (DOT). Philippine tourism officials expected to attract four million Chinese tourists by 2022, before the outbreak happened.
The industry, however, is expected to witness a major impact as the country suspends visa upon arrival for Chinese tourists and businessmen and imposes a temporary ban on all travel to and from China. The National Economic and Development Authority (NEDA) estimates that the economy might lose PHP11 billion to PHP133 billion if the contagion persists until December.
Impact on Offshore Gaming and Real Estate
Real estate investors in Asia Pacific are also bracing for impacts stemming from the coronavirus.
In the Philippines, the Chinese are growing as among the strong property buyers. In 2019, China was the second top foreign source market in Central Visayas with 621,993 tourists. Hence, a ban on Chinese visitors might affect sales of condominium units and other properties.
In a briefing with Colliers International Philippines, Senior Research Manager Joey Bondoc said that travel restrictions on China due to the novel coronavirus may lead to a shrinking of the Philippine Offshore Gaming Operators (POGOs) sector and a resultant increase in vacancy rates.
If POGOs cut down their requirement by half, this would push up the office property vacancy rate of up to 6 – 8% or 300,000sqm of office space. This would subsequently impact the demand for residential space because whenever POGOs sign up for office spaces, they also usually require 30 to 50 residential units. With nearly 15,000 new residential units expected in Metro Manila this year, any reduction in demand from POGOs may have a spillover effect.
Despite these challenges, the International Monetary Fund retained its 5.7% growth projection for the Philippine economy in 2020, driven by higher government spending and backed by the recent policy easing of Bangko Sentral ng Pilipinas (BSP).