Odette Damage to Delay Philippine Recovery
The damage caused by Typhoon Odette on the economy may further push back the Philippines’ full recovery from the pandemic-induced recession, according to economists.
Union Bank of the Philippines chief economist Ruben Carlo Asuncion said damage from Odette could range between the P13 billion from Typhoon Ulysses and P17.9 billion from Typhoon Rolly, which slammed the Philippines last year
The damage from the two typhoons was lower than the amount of devastation caused by Super Typhoon Yolanda, which was placed at P95.5 billion by the National Disaster Risk Reduction and Management Council (NDRRMC).
Luzon accounts for at least 70 percent of national income or gross domestic product (GDP), with the Visayas and Mindanao accounting for the rest.
“Thus, an estimated 30 percent of GDP may be impacted by Odette’s fury considering the considerable scope of the devastation. Pre-Odette, we were expecting a robust six to eight percent fourth quarter GDP growth, and post-super typhoon, we may see at most six percent,” Asuncion said.
The Philippines emerged from the pandemic-induced recession with a back-to-back GDP growth of 12 percent in the second quarter and 7.1 percent in the third quarter.
Due to the impact of the pandemic, the country slipped into recession with a record 9.6 percent GDP contraction last year as the economy stalled when Luzon was placed under enhanced community quarantine.
Amid the stronger-than-expected GDP expansion in the third quarter, the Development Budget Coordination Committee (DBCC) raised this year’s GDP growth target to a range of five to 5.5 percent.
Security Bank chief economist Robert Dan Roces said Typhoon Odette’s drag on Philippine growth may come from agriculture and productivity losses on the back of the extent of the infrastructure damage, affecting the transport of goods, supply of fuel, drinking water, basic commodities, and even relief efforts.
Roces said price pressures in areas hit hard by the typhoon due to supply shortages may impact growth as well, and is potentially inflationary and could drag on into early next year.
For his part, Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said every P20-billion damage due to typhoons is equivalent to about 0.1 percent of GDP.
Ricafort said hard-hit areas are suffering from limited electricity supply, shortages of water, telecom utilities, fuel, and damage to infrastructure, delaying the movement of goods and people, thereby creating some temporary shortage.
He said there could also be temporary loss of jobs and other economic activities until some restoration is in place to allow resumption of business and other economic activities.
“There could also be some temporary increase in prices in areas hit hard by the typhoon, especially in the Visayas and Mindanao – another drag to fourth quarter 2021 GDP growth, and which could lead to some temporary spike in overall inflation,” Ricafort said.
However, the economist said rehabilitation activities of areas hit by storm damage would ironically add to economic activities, just like in large storm damage in the past, such as the reparation and reconstruction of damaged homes, businesses, institutions, and other infrastructure that would entail additional spending by the private sector and the government.
The RCBC economist said financial aid and assistance from other parts of the country and from the international community would lead to increased economic activities and, paradoxically, some pick up in GDP growth as an important offsetting factor.
Ricafort said the expected increase in the demand for repairs and purchases to replace damaged businesses, homes, vehicles, appliances, furnishings, infrastructure, and other property would spur greater economic activities.
“However, the recovery by some businesses, individuals/households, and other institutions from the latest typhoon damage could take longer, especially for some hard hit sectors,’’ he said.