RCBC chief economist Michael Ricafort
MANILA – Coordinated efforts among governments around the globe will ensure that the negative economic impact of coronavirus disease (Covid-19) will be limited.
Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort told the Philippine News Agency (PNA) Wednesday that harmonized policies against the impact of the virus would be a major catalyst for the global economy and financial markets.
He said measures, such as “further monetary policy easing, liquidity infusions, and other stimulus measures (including fiscal policy stimulus) to at least shore up or even boost confidence on the global economy and financial markets”, are also pluses to address its risks to the global economy.
This, as the number of cases, continues to rise, with news reports said there are now about 119,294 cases and 4,300 deaths around the globe.
The Department of Health (DOH) on Wednesday reported an additional 16 Covid-19 cases, bringing the total confirmed cases in the country to 49.
Philippine economic managers forecast the Covid-19 to negatively impact this year’s domestic output by 0.5-1.0 percentage point.
The need to spend on measures against the virus is seen to increase the government’s budget gap to about 3.6 percent of gross domestic product (GDP) from 3.2 percent of GDP target.
Monetary officials also consider slower remittance growth this year on account of Covid-19, with the epidemic seen to weaken inflows growth by 0.2-0.8 percentage point.
Ricafort said Covid-19 adds to earlier worries for global growth this year, citing the expected results of the US-China trade war on the global economy.
He, however, said it would be speculative to have specific figures on the impact of the virus on global output since no one knows until when the problem will persist.
Ricarfort further said sensitivity analysis shows that “every PHP15 billion-PHP20 billion opportunity loss to the economy, especially on tourism, travel, and trade, is equivalent to about 0.1 percent of GDP.”
The impact is seen to be around 0.5 percentage point if opportunity losses reach about PHP100 billion.
He said given the base GDP growth estimate of 6.5 percent for 2020 amid increased government spending especially on infrastructure, GDP growth for 2020 could be reduced to 6 percent in this scenario.
“On a worst-case scenario or if the coronavirus concerns last much longer up to the latter part of 2020, and if opportunity losses are about PHP200 billion, that would be around 1 percentage point drag on GDP growth, resulting to a GDP growth of less than 6 percent (around 5.5 percent from the 6.5 percent base case scenario),” he added.
In terms of the impact on the tourism sector, Ricarfort said every 5-percent decline in tourism revenues would reduce GDP growth by about 0.2 percentage point, resulting in a GDP growth of 6.3 percent.
Every 10-percent decline equivalent to about 0.4 percentage points can result in a GDP growth of about 6.1 percent; while every 15-percent decline of around 0.6 percentage points can result in a GDP growth of 5.9 percent, he added.
Ricafort further said foreign direct investments (FDIs) might also be affected because of the “more uncertain global economic environment largely brought about by the coronavirus concerns, given the uncertain nature on how and when would this would be eventually contained.”
On the other hand, while the virus is seen to result in lower Philippine offshore gaming operators (POGO) revenues due to ban on flights from China, Hong Kong, and Macao, Ricafort expects some respite on the rise of property prices vis-à-vis the strong demand from POGO.
“Any further coordinated moves by global central banks, such as coordinated rate cuts led by the emergency 0.50-Fed rate cut on March 3, 2020, and liquidity infusions, as well as fiscal stimulus measures by various countries around the world, all to counter the adverse effects of the coronavirus on the global economy, would somewhat help in stabilizing the global financial markets and could eventually provide a much-needed boost to the global economy,” he added. (PNA)
