Recession possible amid pandemic
A street is almost empty as the enhanced community quarantine is enforced to prevent the spread of the new coronavirus in downtown Manila, Philippines on Thursday, March 19, 2020. For most people, the new coronavirus causes only mild or moderate symptoms. For some, it can cause more severe illness, especially in older adults and people with existing health problems. (AP Photo/Aaron Favila)
The Philippine economy may contract in the second quarter as a result of the lockdown imposed by the government to contain the spread of the COVID-19 disease while up to 1.8 million people may lose their jobs amid the pandemic, the country’s chief economist said.
“A recession can’t be ruled out,” Socioeconomic Planning Secretary and National Economic and Development Authority (Neda) chief Ernesto M. Pernia told the Inquirer.
While a recession meant two consecutive quarters of year-on-year contraction in gross domestic product (GDP), the government during President Joseph Estrada’s administration had opted to use another definition and denied the economy underwent recession even as the Philippines’ GDP shrank during two straight quarters in 1998.
As far as the one-month enhanced community quarantine being implemented in Luzon and other parts of the country until mid-April is concerned, Pernia said it would slash GDP during “one quarter at least, the second quarter.”
Pernia did not give an estimate of the potential GDP reduction for the April-to-June period, saying that it would be “better to wait toward the end of the current one-month quarantine; for instance, if it’s extended.”
The quarantine is already taking a toll on manufacturing with more than 700 factories in Luzon shut down as of last week, leaving thousands of workers jobless.
Needs swift response
In a March 19 report titled “Addressing the Social and Economic Impact of the COVID-19 Pandemic,” the state planning agency Neda said “we expect a cumulative loss of P428.7 billion to P1.356 trillion in gross value added [in current prices], equivalent to 2.1 to 6.6 percent of nominal GDP in 2020,” no thanks to the COVID-19 pandemic.
“Without mitigating measures, this would imply a reduction in the Philippine’s real GDP growth to -0.6 to 4.3 percent in 2020. The government’s swift and appropriate response remains crucial in the softening the blow of COVID-19, particularly on the most vulnerable members of our society,” Neda said.
Across the transport, tourism and export industries as well as sectors reliant on consumption and remittances, between 116,000 and 1.8 million Filipinos might lose their jobs, Neda added, assuming that the adverse impact of COVID-19 lingered until June.
Neda nonetheless said “the brunt will be felt during the one-month enhanced community quarantine,” during which 1.5 to 5.3 percent of nominal 2020 GDP could be shaved off and result in job losses ranging from 61,000 to a million.
“Attaining the upper bound of 4.3-percent growth rate for 2020 is possible only if we are able to stem the impact of COVID-19 and the enhanced community quarantine to the rest of the economy. By extension, if the enhanced community quarantine is extended beyond one month, or if the spread of COVID-19 is unabated even after the enhanced community quarantine, then even the low-end of the estimate is still too high,” according to Neda.
Plan ahead
In a statement, Pernia presented a comprehensive, three-phased program of interventions to mitigate the impact of COVID-19: first, clinical, medical and public health response, alongside short-term augmentation of health systems capacity; second, rebuilding consumer and business confidence, and third, resuming a new normal state of economic activity that is more prepared for another possible pandemic.
“During a crisis, it is best to plan ahead and avoid the worst-case scenario. We have crafted a comprehensive program of actions, learning from experiences and insights from various sectors and countries. This program requires close collaboration among government instrumentalities from national to local, the business sector from micro to large, NGOs and citizens alike. It is also necessary for us to think ahead even while we address the most urgent and critical challenges,” Pernia said.
“The response measures should delicately balance the health and economic objectives, particularly as the impact varies by economic class. Otherwise, the situation could deteriorate to a social and political crisis,” the Neda chief warned.
Last Monday, economists at the Ateneo de Manila University said “an economic recession for 2020 is not unimaginable” and urged the government to shell out additional funding worth at least P220 billion to arrest COVID-19’s impact on the Philippine economy.
Budget Secretary Wendel E. Avisado on Tuesday said “funds are available already” to better respond to the COVID-19 crisis, while Finance Secretary Carlos G. Dominguez III reiterated that the economic team was preparing another stimulus plan separate from the proposed Congressional package.
These packages will be on top of the earlier announced P27.1-billion fiscal support for COVID-19 response, of which over half would go to the tourism sector.
Dominguez said that even if budgets would be reallocated under the emergency bill approved by Congress, the executive would not reduce the expenditure level of the 2020 national budget, programmed at P4.2 trillion. INQ
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