We’re facing an economic pandemic

In October 1347, a ship returning from China sailed into the Sicilian port of Messina, with most of its crew dead after succumbing to a mysterious disease on the journey, so goes the story. 

“The sailors brought in their bones a disease so violent that whoever spoke a word to them was infected and could in no way save himself from death,” according to one eyewitness account cited by British historian Roy Porter in his book The Greatest Benefit to Mankind and as quoted in an article on Spartacus titled the Economic Consequences of the Black Death. 

“Those to whom the disease was transmitted by infection of the breath were stricken with pains all over the body and felt a terrible lassitude. There then appeared, on a thigh or an arm, a pustule like a lentil. From this the infection penetrated the body and violent bloody vomiting began. It lasted for a period of three days and there was no way of preventing its ending in death.” 

The Black Death, described as the worst disaster in the history of the world, was a global epidemic of bubonic plague that struck Europe and Asia in the mid-1300s. 

An estimated 200 million died, but aside from the death, the tragedy could also very well be defined by how it affected the world economy.

Peasants died and fields were left untended, resulting in food shortages which, in turn, drove prices of basic goods higher. 

Europe found itself burdened by malnutrition, poverty, growing inflation and other economic concerns.

From the plague to the coronavirus

Today, the Great Plague is gone and there is now an antibiotic to treat it. But we are facing another mysterious disease, the coronavirus which continues to spread rapidly. 

The death toll is now at 2,764 and still climbing. There are now 80,997 confirmed cases in 42 countries. 

The numbers are telling, but there is also something the numbers can’t tell just yet — the economic impact of the virus.  

But like the Black Death, the coronavirus is seen crippling the world economy and the Philippines will surely take a hit. 

China: The world’s factory

In our case, I’m sure the economic impact will be severe. It’s not just the airlines and the tourism industries that will suffer. 

Many other key sectors will slow down because most of our local industries are dependent on China for raw materials.

Even the Duterte administration’s much touted Build Build Build program will face a setback because of a slowdown in China’s production. While we have the cement, where are we going to get the steel that we need to build big-ticket projects? 

Even the Makati Subway project is experiencing slight delays in the arrival of the tunnel boring machines from China as a result of the outbreak.

The fast-growing home-building and construction industry is also facing supply problems because China is its main source of materials — from pots and pans to bedroom curtains. 

We import almost everything from China. In 2018, for instance, we imported $4.9 billion worth of electrical equipment, $2.77 billion worth of machinery and $2.2 billion worth of iron and steel from China. We also imported plastics, ceramics, furniture and prefabricated buildings. 

Someone once said, “God made heaven and earth, and the rest was made in China.” Whoever said that was certainly on point. China accounted for 28 percent of global manufacturing output in 2018, according to UN statistics.

Major disruption

There will be a major disruption in the supply chain across the globe and especially in the Philippines. We are, after all, very much dependent on cheap imports from China. That is the problem when we don’t have enough local industries and protection from the flood of imports.

Across the globe, the financial world is already realizing how much is at stake and we should to.

As I write this, the S&P 500 just wiped out about $1.737 trillion of its value during a two-day market selloff. This represents a 6.3 percent drop, the largest for the benchmark since August 2015.

Unfortunately, the mysterious novel coronavirus is turning out to be more than a temporary blip. 

A shot in the arm

The Philippine economy is already contending with the recent unrest of the Taal Volcano and the outbreak of African swine fever, which have hurt the country’s food sector.

How our authorities will address the economic impact of the coronavirus remains to be seen. It can’t be business as usual. Government would have to boost spending, help companies find alternative sources of raw materials and proceed with infrastructure projects that can already move forward. 

While we aren’t facing a situation as lethal as the Black Death, we are certainly facing a serious problem.

As our health authorities focus on containing the spread of the virus, our economic team must work double time to cushion the country from this economic pandemic. 

The Philippines needs a shot in the arm and how well the government will provide that will shape the future of our economy and will certainly be a relevant gauge of the success or failure of the Duterte administration. 

Iris Gonzales’ email address is [email protected]. Follow her on Twitter @eyesgonzales. Column archives at eyesgonzales.com