Philippine economic growth revs up as Taal Volcano looms

Jessica Fenol and Joel Guinto, ABS-CBN News

Posted at Jan 21 2020 09:53 AM | Updated as of Jan 21 2020 10:59 AM

Fishermen in Laurel, Batangas harvest tilapia on Jan. 20, 2020, a week after Taal Volcano erupted. The Philippines will release fourth quarter economic growth data on Jan. 23 as authorities braced. Mark Demayo, ABS-CBN News

MANILA -- The Philippine economy was tipped to grow at its quickest pace for 2019 in the quarter ended December on the back of faster state spending and low borrowing costs, analysts said, as the government kept watch on potential fallout from the Taal Volcano eruption.

Gross domestic product likely grew 6.4 percent in the last 3 months of 2019, according to the median forecast of 22 economists in a Bloomberg poll. Socioeconomic Planning Secretary Ernesto Pernia gave a 6.6 percent forecast, compared to the 6.2 percent expansion posted in the previous quarter.

Taal Volcano, located in the industrial and tourism region of Calabarzon south of Manila, spewed giant ash columns on Jan. 12 and remained under watch for a possible hazardous eruption.

"If there are more eruptions, then it may manifest long term and become significant," Regina Capital head of sales Luis Limlingan told ABS-CBN News. Official GDP data is due out on Thursday.

On industry and services alone, the volcano could cause P4.3 billion in "foregone income" in Calabarzon, representing 0.17 percent of the region's GDP, the National Economic Development Authority said.

If damage extends beyond the 14-kilometer danger zone, to 17 kilometers, it could swell to P6.7 billion or 0.26 percent of the region's economic output, it said.

GROWTH CATALYST

Public spending revved up in the second half after being held back by the delayed passage of the 2019 budget, signed 4 months into the year. President Rodrigo Duterte signed the P4.1 trillion 2020 budget last Jan. 6.

Inflation also cooled last year from nearly 10-year highs, allowing the Bangko Sentral to cut the benchmark lending rate by a cumulative 75 basis points in 2019, with Governor Benjamin Diokno signalling a further 50-point reduction this year.

"The fourth quarter should see a revival in investment activity, recovery in capital formation after two quarters of contraction, while government spending improves on 'catch up' spending," ING Bank senior economist Nicholas Antonio Mapa told ABS-CBN News.

"Consumption should deliver more punch given benign inflation conditions," Mapa said, citing the 1.6-percent average inflation in the fourth quarter.

The economy likely grew 6.5 percent in the fourth quarter of 2019 and 6 percent for the entire year, BDO Chief Market Strategist Jonas Ravelas said. The economy could grow by 6.5 percent this year, he said.

Dollar remittances from overseas Filipinos and revenues from business process outsourcing and offshore gaming operations likely boosted consumption in the fourth quarter, which will carry over into 2020, Philippine National Bank said in a research note.

TAAL EFFECT

Calabarzon houses 60 of the Philippines' 400 economic zones, all of which are operational after the Jan. 12 ash eruption that also disrupted flights at the capital's main airport, authorities said.

The region contributes as much as $3 billion (P152 billion) to annual export income, Philippine Economic Zone Authority Director General Charito Plaza told ANC's Early Edition.

Ecozone workers will be trained in disaster response, with the aim of getting PEZA accredited as military reservists, said Plaza, a reservist general in the Air Force.

"We'll see to it that any type of natural or man-made disaster, God forbid if there's going to be terrorist attack or insurgency attack, all the workers in every ecozone are ready to respond," she said.

Food prices could spike because of the Taal Volcano eruption since Calabarzon, is the country's second largest producer of both live chickens and hogs, PNB said in a separate research note.

A fish kill is "starting" with bangus or milkfish in Taal Lake and could spread to tilapia, Agriculture Secretary William Dar said on Monday.