Taal Volcano eruption risks GDP growth, analysts say

By Luz Wendy T. Noble and Beatrice M. Laforga

THE CONTINUED ERUPTION of Taal Volcano in Batangas province risks the country’s utilities, agriculture, transport and tourism sectors, not to mention overall economic growth, analysts said on Monday.

Consumer prices could also spike due to temporary supply constraints, they said.

“This latest natural calamity could lead to some temporary supply and logistical constraints that could result in higher prices of food, agricultural products, fuel, transport and other basic commodities,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a mobile phone message. “Inflation could pick up as a result.”

Property prices in badly hit areas could also decline, he said, adding that tourism could take a beating as canceled flights lead to higher airfares.

Batangas province contributed a third or about 2.079 million of the 7.05 million overnight travelers in Calabarzon in 2018, according to data from the Tourism department. More than 595,000 travelers stayed in the town of Talisay, the jump-off point to Taal Volcano’s crater lake.

The government was making “quick estimates” on the economic costs of Taal Volcano’s eruptions, Finance Secretary Carlos G. Dominguez III told reporters in a Viber message on Monday.

“We will of course need to take stock of the full economic costs of this natural disaster, quick estimates of which are still being generated by relevant national agencies and local governments,” he said.

“The Southern and Central Luzon as well as National Capital Region (NCR) are some of the heftier pistons of our country’s economic engine, and we will do what is necessary to get areas affected by this natural disaster up and running as fast as possible,” Mr. Dominguez said

He noted that NCR and the Calabarzon Region — made up of Cavite, Laguna, Batangas, Rizal, and Quezon provinces — contributed 53% of the country’s total gross domestic product (GDP) in 2018 at 36% and 17% respectively. Central Luzon had a 9% share.

The country loses 1-2% of its yearly GDP due to natural disasters, especially typhoons, he said.

Mr. Dominguez said the government was monitoring the situation and responding urgently to the needs of those affected by the natural disaster, he said

More than 2,500 families or about 10,700 people were evacuated to 45 evacuation centers as of Monday morning, mostly in the provinces of Batangas and Cavite, the Finance chief said.

The nation’s volcanic agency raised the alert level for Taal Volcano to Level 4 on Monday, while ashfalls were felt in the nearby provinces of Tagaytay, Laguna, Cavite, parts of Rizal, Bulacan and some cities in Metro Manila.

The nation could lose as much as P35 billion because of the volcanic eruption, Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc., said in a text message.

Damages from the eruption of Mt. Pinatubo in 1991 reached P25 billion, excluding the cost of caring for evacuees worth P6.7 billion, Mr. Asuncion said, citing a study by the National Economic and Development Authority published on the United States Geological Survey website.

TRIGGER POINT
Meanwhile, the government’s recently issued catastrophe-linked (CAT) bonds may trigger payouts once damage caused by Taal Volcano’s eruptions reach a trigger point, Mr. Dominguez said.

The government has a CAT bond in place that might be triggered by a “1-in-19 year” earthquake that translates to losses worth P11 billion,” he said, citing data from the Bureau of the Treasury. This would be similar to the losses from the 1990 Luzon earthquake in Nueva Ecija, he added.

National Treasurer Rosalia V. de Leon said the government will have to see first if losses had reached a trigger point.

The funds may be used to finance relief operations and building reconstruction, among other things, she said.

The Philippine government issued through the World Bank its first three-year CAT bonds worth $225 million in November — $75 million for losses from earthquakes and $150 million for losses from tropical cyclones.

Aside from the bonds, the Finance chief said the Treasury bureau is also working on a “natural catastrophe cover” for the state’s important asses such as schools, roads and bridges.

Government offices and classes were suspended in Metro Manila yesterday as ashfall from Taal Volcano reached some cities near the capital on Sunday night.

The Treasury bill auction was also suspended and reset for Tuesday, while the Bankers Association of the Philippines closed the dollar-peso spot trading. There was also no trading at the Philippine Stock Exchange on Monday.