MANILA (BLOOMBERG) – About a week into the month-long lockdown of the Philippines’ main island of Luzon, businessmen are calling for a 281 billion peso (S$8 billion) fiscal stimulus to soften the economic blow of the spreading coronavirus outbreak that has displaced millions of workers.
More than 700 factories and 400 economic zones have been shut, while doctors are warning of a possible collapse in the healthcare system as infections rise.
A recession is possible because consumption, the main Philippine economic engine, is set to slump as the lockdown could be extended nationwide and run longer, Capital Economics said.
A “massive stimulus” and “forceful action” are needed to counter the effects of the pandemic, the Philippine Chamber of Commerce and Industries and 31 other business groups said in a statement.
The lockdown is “literally a matter of life and death” for millions of workers and their families that “may trigger violence and longer-term social tensions,” they said.
The Philippines has scrambled this week to contain the outbreak, starting with a lockdown of Luzon, the home to almost 60 million people that accounts for at least 70 per cent of its economy.
To mitigate the damage, the central bank cut interest rates by 50 basis points on Thursday(March 19) while President Rodrigo Duterte, who put the country under state of calamity, wants Congress to add to his 4.1 trillion peso budget this year.
“You don’t want to kill the goose that lays the golden egg,” said BDO Unibank Inc economistJonathan Ravelas.
“Consumers are hurting. It’s bigger trouble for government and businesses if the hit on households is wider.”
Even with the latest rate cut, economic growth could slow to a range of 5 per cent to 5.5 per cent, central bank Governor Benjamin Diokno said Friday.
Capital Economics predicts the economy will barely grow in 2020 as a “sharp contraction” could set in during the second quarter, followed by a less severe decline in the third before a rebound in the fourth.
The Philippines has a chance of avoiding a slowdown if it moves quickly with fiscal policies to compliment the central bank’s rate cut, says Congresswoman Stella Quimbo, who is crafting a 173 billion peso stimulus bill.
She estimates about 65 billion pesos is needed to assist Luzon’s 7 million “no-work no-pay” workers who were hit by the lockdown, including 1.5 million in the capital region.
About 108 billion pesos in subsidies is required for small and medium enterprises, of which at least 43 billion pesos should be allocated to the tourism sector, which has been the hardest hit, she said.
Ms Quimbo estimates the epidemic’s economic damage at 270 billion pesos, or about a 1.5 percentage point reduction in GDP growth, compared with 187 billion pesos, or a 1 percentage point reduction prior to the lockdown.
Congress, which postponed a special session Saturday for a meeting between Duterte and some lawmakers, will sit Monday to hammer out a supplemental budget for not less than 200 billion pesos, House Speaker Alan Peter Cayetano said.
Finance Secretary Carlos Dominguez said it will be funded by “non-budgetary” sources, and won’t affect taxes or infrastructure and poverty reduction programs.
At Duterte’s request, the nation’s biggest companies are taking steps to help contain the lockdown’s economic toll.
Property developers such as SM Prime Holdings Inc. and Ayala Land Inc. have waived rentals in their shopping malls for the duration of the lockdown, while lenders including BDO Unibank Inc. and Security Bank Corp. are granting payment extensions to borrowers.
Some companies have committed to continue salary payments, while others are providing funds to help employees.
“With or without these measures, consumption, your biggest economic driver, has already taken a hit,” said Papa Securities Corp analyst Manny Cruz.
“These, hopefully, could lessen the damage.”
The country’s virus cases have risen to 380 with 25 deaths, Reuters reported Sunday, citing Health Undersecretary Rosario Vergeire.
Hospitals are strained from rising infections, blamed in part by Duterte’s critics on his reluctance to slam the doors on travelers from China when the virus first broke out.
While containment of affected areas will slow the spread of the virus, the government should set up centres for infected patients, according to a joint statement by 11 of Manila’s biggest private hospitals.
“The prospect of the healthcare delivery systems crashing down is imminent and real,” they said.
“It is already happening.”
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