Navigating rough terrain
Economic forecasting in a time of a global health emergency is an especially humbling task. Not only do we know that we don’t know how the crisis will evolve, and over what time period, but we also know that we don’t know how economic agents will behave, in response not only to the crisis, but also to measures taken by governments to contain the virus’ spread. And even as news trickles in about the number of infections and deaths, about empty streets and ghost towns, about flight cancellations and plant closures, past similar episodes suggest that a sharp post-crisis rebound is possible. That makes it doubly difficult to make defensible guesses. So far, attempts even by governments to provide some estimate of the likely overall economic losses have mainly zeroed in on presumed foregone income linked to local bans on travelers from China. And even those estimates are based on static assumptions of the length of the ban, the number of tourists turned away, the number of days they would otherwise have stayed, and the amount of money they might have spent.
In this report, we take the easy way out, by acknowledging that we really cannot project the likely impact at this point. But, we see the coronavirus (COVID-19) as a significant downside risk, despite coping measures governments have instituted to shore up confidence. These include, in the Philippines’ case, an early policy interest rate cut, and a drive to boost domestic tourism.
We are meanwhile maintaining our baseline scenario of a gradual uphill climb, with GDP growth averaging 6.2% in 2020, and 6.3% in 2021, bounded by domestic capacity constraints. We are also taking note of greater on-the-ground concern that the local terrain is growing rougher for businesses to navigate, and discuss other risks associated with gaps in the country’s anti-money laundering framework, and the termination of the Visiting Forces Agreement with the United States that may lead to a harmful downshift in sentiment.
Now read on...
Register to sample a report