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CORONAVIRUS - The situation in Philippines

1. General situation

The “Enhanced Community Quarantine (ECQ)” has been extended anew until 15 May for Metro Manila, Central Luzon (Region III), Calabarzon (Region IV-A – Cavite, Laguna, Batangas, Rizal, and Quezon) and other provinces that continue to face high risk of COVID-19 infections. While regions, provinces or areas which are considered moderate and or low risk in the spread of COVID-19, will be under “General Community Quarantine” (GCQ) until mid-May. If there is no deterioration, GCQ areas will be relaxed leading to normalization. The lockdown in Luzon, which accounts for 70% of the Philippine economy, began in mid-March and was originally scheduled to end on April 12 but was extended to April 30.

2. Preventive measures

Strict confinement measures implemented to contain the spread of the virus, including extensive restrictions on travel and mass gatherings, and the closure of schools and non-essential businesses, and “stay-at-home” orders. Mandatory wearing of face masks outside the homes.

All government offices, law enforcement agencies and local government units (LGUs) directed to mobilize all necessary resources to curtail and eliminate the spread of COVID-19. Additional police and military troops will also be deployed to monitor checkpoints and points of convergence like public markets to ensure that social distancing rules are observed.

Inbound travel restrictions:

Entry of foreign nationals are restricted; issuance of entry visa for foreign nationals are temporarily suspended and all previously issued visas are cancelled, except those issued to the following: Foreign Government and International Organization officials accredited to the Philippines and foreign spouse and children of Filipino nationals (provided that the foreign nationals are traveling with the Filipinos). Foreigners and overseas Filipino workers allowed to leave the country through any port in Luzon but should show proof of their international travel itinerary. Returning Overseas Filipino Workers (OFWs), whether sea-based or land-based, will be subjected to a mandatory 14-day facility quarantine upon arrival in the Philippines.

3. Economy

a. Economic impact

Philippine economy may lose between P276.3 billion and P2.5 trillion, depending on how the coronavirus pandemic develops in the next few months according to government think-tanks (https://www.bworldonline.com/impact-of-covid-19-on-key-philippine-economic-sectors/).

Metro Manila, which accounts for 37.5% of GDP, is a major concern during the pandemic, while the entire Luzon region accounts for about 73% of the country’s GDP. Sectors from retail, real estate, to manufacturing are experiencing serious challenges due to the enhanced community quarantine. The Philippine Stock Exchange Index has dropped by 32% year-to-date (https://www.bworldonline.com/looking-at-the-economy-amid-covid-19).

Over 2 million employees were displaced during the first five weeks of the Luzon-wide ECQ wherein about 70% of this were affected by temporary business closures and 30% employees were subject to alternative work arrangements such as reduced working days and hours; forced leave; and work-from-home. Metro Manila accounted for the most number of displaced workers.

The Government’s infrastructure program is facing further delays due to the quarantines (COVID-19) outbreak, as well as the repurposing of funds to contain the pandemic. While slower construction industry growth is seen this year as most activity is concentrated in areas affected by the Enhanced Community Quarantine (ECQ). With strict ECQ measures imposed on Luzon, a large proportion of projects would have experienced stop work orders, leading to an unfavorable outlook for the Philippine buildings sector for 2020. Post-ECQ, construction activity will still face challengessuch assupply chain especially if sourced from foreign markets and logistics and shortages due to the business activities disruption (https://www.bworldonline.com/fitch-solutions-sees-slower-construction-industry-growth).

b. Trade barriers

No import/export restrictions are implemented during the pandemic period.

On the other hand, the importation of health equipment and supplies deemed critical or needed to address the COVID-19 public health emergency shall be exempt from duties, taxes, and fees persuant to Republic Act No. 11469, otherwise known as “Bayanihan to Heal as One Act”. Import requirements, application and registration process of needed medical supplies, equipment and protective equipment as COVID-19-critical commodities have been streamlined.

Department of Agriculture’s Bureau of Animal Industry issued Guidelines in the Acceptance of Electronic Export Health Certificate/International Veterinary Certificate to facilitate cargo clearance processing during the period of the ECQ.

Botst u buiten de EU op handelsbelemmeringen of andere problemen op het vlak van markttoegang? Laat het ons weten via handelsbelemmering@fitagency.be. Wij analyseren uw aangifte en maken die via de geijkte kanalen over aan de bevoegde instanties.

c. Measures for economic relaunch

President Duterte’s administration launched a P1.17 trillion 4-pillar socioeconomic strategy to fight the COVID-19 pandemic, and eventually recover from it. (https://www.dof.gov.ph/the-duterte-administrations-four-pillar-socioeconomic-strategy-against-covid-19/)

Pillar 1: Emergency support for vulnerable groups and individuals

Pillar 2: Expanded medical resources to fight COVID-19 and ensure the safety of frontliners

Pillar 3: Fiscal and monetary actions to finance emergency initiatives and keep the economy afloat

Pillar 4: An economic recovery plan to create jobs and sustain growth

As of 21 April, the total budget of the 4-pillars strategy is now at P1.49 trillion (7,8% of the country’s GDP).

The government is looking to implement a Php120-billion credit guarantee program for affected small businesses as well as an enhanced net operating loss carryover of five years to help businesses cope with losses from the Covid-19 pandemic (https://businessmirror.com.ph/2020/04/15/dof-bares-p120-billion-small-business-credit-guarantee/). At the same time, it will roll out a Php51-billion Small Business Wage Subsidy program for some 3.4 million employees in small businesses affected by the Luzon-wide lockdown. This complements the government’s Social Amelioration Program of the Bayanihan Law (https://www.dof.gov.ph/download/dof-report-on-covid-19-socioeconomic-responseapril-14-2020/).

The government is looking at the possibility of a “rolling restart” and “rolling reopening” schemes for the selective and gradual lifting of the Luzon-wide enhanced community quarantine after 15 May to help jumpstart the economy while the COVID-19 pandemic is being contained.

The National Economic and Development Authority (NEDA) will prioritize crafting the economic recovery plan and fast-tracking of the national identification system after the ECQ. Frontloading the registration of 5 million people to the national ID system this year will help the government’s distribution of relief measures amid the coronavirus disease 2019 (COVID-19) pandemic. The ID system will be “slowly” ramped up to 40 million next year and 40 million more in 2022.

There will be a push for infrastructure projects under the Duterte administration’s “Build, Build, Build” program that will be prioritized and will be determined once the situation normalizes.

Proposal for the gradual reopening of shopping malls, public transit, and other select services whether the government will lift or extend the enhanced community quarantine. Meanwhile, Transportation Department eyes the possibility of a 30% capacity resumption of public transportation particularly buses and trains complying to the physical distancing measures. Resumption of economic activities can be done while the public and private sector ramp up mass testing to arrest the spread of COVID-19. On agriculture, the full opening of the sector is strongly suggested to ensure sufficient food supply during the coronavirus crisis.

d. Economic outlook

Finance Department is readying the country’s response to global recession brought by the COVID-19 pandemic. The Philippines will try to shield its domestic economy through a stimulus plan.

On an annual basis, the gross domestic product is expected to shrink by 0.2% in 2020. But would likely bounce back to 7% growth next year as the government policy gains traction. Inflation would also probably slow this year, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno forecasts that inflation will average at the low end of the target range at 2% in 2020, down from the previous forecast of 2.2%. The major downside risks to inflation are the decline in prices of global crude and non-oil products and the impact of COVID-19 on both global and domestic growth (https://www.bworldonline.com/bsp-economy-may-shrink-by-0-2/)

Critical to the recovery scenario is the consumption and investment growth. Foreign Direct Investments (FDI) is expected to be hit as coronavirus worries cloud investor sentiment.

The figures of the Philippine GDP growth and projected growth rates, % per year you can find on:

https://www.csis.org/analysis/economic-toll-covid-19-southeast-asia-recession-looms-growth-prospects-dim

Remittances, which comprise 10% of the GDP, is also expected to contract by about 0.2 to 0.8 percentage point this year as Filipinos living and working abroad face massive layoffs due to the coronavirus-led global economic slowdown. This could also have a spillover effect on consumption. Consumption is a key segment of the economy, accounting 70% of its gross domestic product. Cash remittances, which fuel domestic consumption, grew by 4.1% to reach a record $30.133 billion in 2019.

Household consumption is expected to shrink as consumer confidence dips. A 5.0 to 10.0 percent decline in household consumption of non-essential commodities (i.e. alcoholic beverages and tobacco, clothing and footwear, furnishings, household equipment and routine household maintenance, recreation and culture, restaurants and hotels, and miscellaneous goods and services) could result in a loss equivalent to 0.2 to 0.5 percent of GDP. Private investments, as well as imports and exports are all likewise expected to dwindle this year (source: http://www.neda.gov.ph).

S&P raises Philippine unemployment estimate to 6.8% this year.

e. Short term opportunities

Philippines economy is basically sustained by domestic consumption. One of the first responses is geared towards the rebuilding of the consumer’s confidence and capability. NEDA also highlighted the necessity to support essential goods production. March data is expected to have weighed heavily on the domestic demand on manufacturing products. In the coming months, manufactured goods that will likely increase production are food, beverages, chemical products, and health-related manufactures.

4. Useful links

Health

Trade, businesses, economy

Travel and immigration information

5. Dossier Coronavirus

Het coronavirus heeft een wereldwijde impact, niet alleen op de gezondheid maar ook op de economie. Ook uw export kan hiervan gevolgen of zelfs hinder ondervinden.

FIT monitort de risico's dagelijks en ons buitenlands netwerk informeert u over alle implicaties voor Vlaamse exporteurs op hun internationale activiteiten.

In het dossier Coronavirus vindt u een aantal nuttige tips, adviezen en inzichten in de economische impact van de verspreiding van het virus op internationaal ondernemen.

Met vragen over internationaal ondernemen in tijden van Corona, kan u terecht bij exportadvies-corona@fitagency.be.

28 april 2020