Novel coronavirus may further stall China-funded projects

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Metro Manila (CNN Philippines, February 14) — Infrastructure projects funded by China could face further delays, as travel bans due the novel coronavirus outbreak prevent Chinese engineers and laborers from getting the work done.

BDO Chief Market Strategist Jonathan Ravelas said the disease, which has infected thousands worldwide, could stall big-ticket projects funded by Chinese loans and grants.

"Most likely, the immediate impact that we see could be delays if they will be providing people in the projects. We could see some near-term halt in construction mainly because of exposure, if there will be some people coming from China," Ravelas told CNN Philippines' Business Roundup.

A travel ban to and from Hubei province where the novel coronavirus originated, took effect January 31. President Rodrigo Duterte expanded the ban to the rest of mainland China, as well Hong Kong and Macau two days later in a bid to contain the spread of the disease.

Among projects funded through official development assistance from China are the Kaliwa Dam, Mindanao Railway, and Chico River Pump Irrigation Project. Some of the loan agreements, however, require bringing in Chinese contractors and experts to do some of the work. Smaller bridge projects have also been funded by Chinese money.

READ: Gatchalian on foreign workers for infra projects: ‘We’re borrowing but not benefiting’

The economist noted that this could lead to a slowdown in overall economic growth, but pointed to other sectors which could offset the blow.

"The 2020 budget and a portion of 2019 budget still needs to be deployed. Most of these projects are on the local government front," Ravelas said. "Should the government be able to continue with these projcets on the local government units, we could probbly see a much lesser impact in terms of the fallout of this novel coronavirus."

The analyst added that strong household and government spending would readily prop up market activity. He said the Philippine economy could easily expand by at least 6 percent to as fast as 6.25 percent this 2020. This would be faster than last year's 5.9 percent expansion, but would miss the 6.5-7.5 percent growth goal set by the government.

Initial government estimates pegged potential losses from the virus outbreak equivalent to 0.3 percent of the local economy if the rapid infections last until June, while the reduction could go as high as 0.7 percent if the disease stretches for the entire year.

Ravelas also noted that Philippine exports could also hit a snag, as well as importers who source their materials from the mainland.

Fitch Ratings said in a separate study that the Philippines looks "more insulated" compared to other Southeast Asian nations from the adverse effects of the outbreak, saying that it has a more diverse market for export items.

Meanwhile, Global bank ANZ Research said first quarter growth would likely take a hit from the coronavirus, especcially with tourism taking the biggest blow. Chinese nationals have been leading tourist arrivals in recent years, according to government data.

READ: PH tourism to lose ₱20-B due to novel coronavirus

"The impact on full-year growth will depend on how quickly the virus spread can be contained and how quickly infrastructure spending can be pressed into action," ANZ economists Mustafa Arif and Sanjay Mathur said in a market report.