Page last updated at 06:22 CST6CDT, Friday, 15 May 2020 PH
The Philippine economy can still grow at 6% or more in GDP in 2020 if we do not succumb to Coronaphobia. It is prudent to expect the worst in estimating the impact of the slow down in our trade with the epicenter of the epidemic, China. The Asian Development Bank has estimated that the Philippine economy could lose as much $669 million to $1.94 billion in GDP and suffer job losses of as many as 87,000 to 252,000 workers. Because of our strong trade and product linkages with China (about 2% of GDP) and the large number of Chinese tourists (second only to the Koreans) during the recent past, the slowdown of the Chinese economy will have a significant impact on our international trade and foreign exchange receipts from tourism, estimated to amount to a loss of $2.2 billion in the worst-case scenario of a 50% drop in Chinese tourists over the next six months. Such huge drops in dollar receipts could lead to a healthy depreciation of the pesos to levels of 52 to 53 pesos to a US dollar. I say healthy because a weaker peso benefits the millions of relatives of overseas Filipino workers who are remitting more than $30 billion yearly to the country. The impact of a weaker peso on the costs of our imports can be mitigated by the low international prices of oil products that could even reach $40 per barrel.
The first defense we have against the global crisis is precisely the more than 10 million OFWs who through hell and high water over the last 15 years have weathered one global crisis after another and have never failed to send annual increases of 3 to 5% in their remittances. This is one piece of statistic I have monitored very closely over the last fifteen years and have gained enough confidence to say that COVID-19 will not make a dent on their remittances. I forecast at least a 3% increase in OFW remittances for the whole of 2020. Convert some $33 billion of remittances using an exchange rate off at least P53 to $1 dollar and you have the first countervailing force against the dampening effect of COVID-19 on the economy. All the billions of pesos in the hands of the OFW relatives are the strongest engine of growth in our economy that is dominated by consumption expenditures. The strong domestic market will be especially felt in the economic housing sector (unit prices between one to five million pesos), home appliances, education-related and health-related expenditures, and domestic tourism.
It is very important that our government officials and private sector executives do not over-react to the Corona virus scare and be inflicted with Coronaphobia. There are enough safety measures being drummed into minds of the public (e.g. constant washing of hands with soap and water or with alcohol; keeping distance from people when in public places; wearing masks in especially vulnerable places like hospitals and public markets; avoiding foreign travel in the meantime; etc.). With the low rate of infection in our population of 110 million Filipinos, it would be counterproductive to adopt draconian measures to protect the public from the virus. For example, I was pleased to learn that the Baguio officials did not cancel their annual Panagbenga (flower festival) especially since as of March 3, only one patient was completing a 14-day quarantine in the entire city of Baguio. As long as those participating in the flower festival were following such precautionary measures as washing their hands, not putting their hands on their noses and eyes, keeping enough distance from one person to another and avoiding physical contact (which is not necessary in the dance sequences of the festival, etc.), there was little danger of the virus being transferred from one human being to another.
In contrast, I think officials in the city of San Juan (which jokers renamed San Wuhan) over-reacted when they temporarily closed the prayer room for Muslims in Greenhills because there was a Muslim vendor from Greenhills who was diagnosed with the Corona virus at the Cardinal Santos Hospital. Even the World Health Organization (WHO) representative in the Philippines, Rabindra Abeyasinghe opined that it was not necessary to close the prayer room. It could have been a disservice to the entire Greenhills vendor community as Rex Drilon, former President of Greenhills Shopping Center, commented in a Viber message. Expressing the same reservation as the WHO Representative, Mr. Drilon said that the vague report about a possible COVID-19 case in Greenhills did not warrant advising people to stay away from the entire Greenhills: “I feel strongly about this because it took us a long time to rebuild Greenhills into what it has become. Also, more than 60% of the more than 1,300 Maranaw merchants were affected by the Marawi siege and are still recovering from that terrible incident…I feel strongly about this because it is in Greenhills that we are proving that Muslims, Christians and other peoples can work together, earn a decent living together and even play together. Our relations with our brother Muslims need to be further strengthened. These vague reports being spread around do not help.”
The Greenhills case illustrate strongly the need for calm against alarmist reports that can lead to Coronaphobia. As long as we are able to balance the measures of health security and the requirements of normal daily living, there are sufficient policies and measures that we can take to build on our strength of a large domestic market that can be better immunized from global crises than most of our neighboring countries that have overly globalized economies (with exports representing 100% or more of their GDP compared with only 30% of ours). As we continue to obtain large revenues from our OFW families and BPO-IT workers, the market for food products (fresh and processed) can continue to be robust even if there is a shift to electronic trade in the restaurant business. The impending further increase of salaries of our public teachers will go a long way to sustaining domestic consumption of basic products of food, clothing, home furnishings, health care and leisure. In fact, as President Duterte himself has declared, we need not be resigned to empty hotels and restaurants because of the absence of Chinese tourists. We should promote a great deal more of domestic tourism among the more than 60 million Filipinos who are considered to be in the low-middle income and high-middle income categories. Even the more wealthy families who regularly travel abroad during the summer with their respective families may be convinced to focus all their leisure travel plans for this year within the country as they discover the numerous tourism destinations we have in Central and Eastern Visayas, Palawan, Panay, Bohol, Southern and Northern Luzon, and many others.
This should be the year when domestic tourism should take a quantum leap. In fact, it may actually be a year when many smaller entrepreneurs will be encouraged to put up bed-and-breakfast hotels to cater almost exclusively to domestic tourists. The larger and more expensive hotels should more aggressively market their staycation and business seminars and conferences offerings. In their turn, large and medium-sized corporations should take advantage of the slight pause in business occasioned by COVID-19 to invest more in in-house management and other human resource development programs that can make use of the facilities of the five-star hotels who would be more willing to give large discounts as they face a big fall in their foreign (especially Chinese) tourists. (To be continued).