‘Economy at risk from virus outbreak’

Philippines not immune from negative impact of coronavirus scare

MANILA, Philippines — The Philippine economy is not immune from the negative impact of the deadly virus outbreak in China, economists and global credit rating agencies said.

Nicholas Mapa, senior economist at Dutch financial giant ING Bank Manila, said the Philippine economy needs a shot in the arm and not an additional handicap in the face of the impending disruption to the world economy.

Mapa said lower tourist arrivals as a result of the virus scare would likely slow a steady and burgeoning source of foreign exchange, although some tourists utilize payment apps and other forms of electronic payments to transact in the Philippines.

“Nonetheless, we may have to expect a smaller inflow of these travel exports in 2020, with yet another reason for the depreciation of the peso against the dollar. Meanwhile, the more likely and direct impact on the economy will be on the consumption front as global travel is expected to slow altogether,” Mapa said.

Roughly 21 percent of tourist arrivals in the Philippines are from mainland China, second only to tourist arrivals from South Korea.

“Tourist arrivals mean an influx of foreign currency as well as domestic consumption with a boost to sales for restaurants, retail and hotels. However, with the threat of contagion of the 2019-nCoV, travel to and from China has been curtailed.  With no end in sight just yet for the virus, we can expect a hit on the tourism sector in the near term as the Philippines may see a drop in its second most important market,” Mapa said.

S&P Global Ratings said the Wuhan coronavirus outbreak would negatively affect the cash flow of gaming and lodging companies in the Asia Pacific region including the Philippines.

The debt watcher said Macau is the most exposed gaming market to the spread of the virus, while other gaming markets in the region such as the Philippines, Singapore, Cambodia and Australia also rely heavily on Chinese visitors.

S&P has a negative outlook on Universal Entertainment Corp., operator of Okada Manila resort, saying a prolonged reduction in visitation could lead to a weaker operating performance.

It added the company faces potential cash flow declines as the Philippine unit contributes over 50 percent of the total revenues of the casino operator.

“We believe visitors from mainland China account for a portion of this resort’s clientele; however, we believe the profit contribution from its Chinese visitors is modest compared with its potential revenue exposure,” it said.

On the other hand, Moody’s Investors Service said the outbreak would take a toll on tourism sectors in Asia Pacific and places outside the region that receive tourists from China.

“The fear of contagion could dampen consumer demand and affect tourism, travel, trade, and services in Hong Kong, Macau, Thailand, Japan, Vietnam and Singapore, which have been the top destinations of Chinese tourists in recent years,” the debt watcher said.