Impact of typhoons on RP manageable – Moody’s

MANILA, Philippines – Moody’s Economy.com, the economic research and analysis arm of New York-based credit-rating firm Moody’s Investors Service, said the impact of tropical storm Ondoy (international name: Ketsana) and typhoon Pepeng (Parma) on the country’s domestic output is minimal.

In a report titled “The Economics of Natural Disasters” Moody’s Economy.com economist Tine Olsen said the typhoons will likely dent the Philippine economy in the coming months but the economic damage would be manageable.

“Because the destruction included heavily populated areas and the capital, Manila, the typhoons will likely dent the Philippine economy in coming months,” Olsen noted.

He pointed out that the natural calamities caused heavy flooding in areas where the Philippines derives 80 percent of its gross domestic product.

The economist added that important corn- and rice-growing areas have been damaged while electricity and water have been cut off.

He said the Philippines would likely report higher consumer prices particularly for food in the coming months.

Inflation kicked up to 0.7 percent in September from a 20-year low of 0.1 percent in August due to higher food prices without taking into consideration the impact of tropical storm Ondoy and typhoon Pepeng.

Moody’s Economy.com also cited the deadly earthquake in Indonesia as well as the deadly flooding in Taiwan caused by typhoon Morakot.

“The Asia-Pacific region is no stranger to natural disasters, and unfortunately the past few months have seen an outsize number wreak significant damage in terms of human capital,” Olsen said.

As the damage is assessed and reconstruction work begins, he said policymakers would face uncertainty about the impact of the disaster on their economies.

“After the loss of lives and physical capital, economies in the Asia-Pacific region hit by natural disasters may be boosted by spending on reconstruction and capacity building,” he added.

However, he warned that private consumption would be squeezed during the period of emergency and after.

On the other hand, the economist said government spending on emergency relief and rebuilding would put fiscal budgets under stress.

“Rebuilding efforts have the potential to boost the economy through job creation, not unlike the effects from expansionary fiscal policy,” he said.

Moody’s Economy.com sees the country’s GDP expanding by 3.3 percent this year from the revised 3.8-percent growth last year.

Economic managers through the Cabinet-level Development Budget Coordination Committee see the GDP expanding between 0.8 percent and 1.8 percent instead of 3.1 percent to 4.1 percent this year.

Due to the full impact of the global economic meltdown, the country’s GDP growth slackened to one percent in the first half of the year from four percent in the same period last year. –Lawrence Agcaoili (The Philippine Star)