The COVID-19 lockdown imposed in Luzon and other parts of the country since mid-March already cost the Philippines forgone output worth 5.8 percent of its gross domestic product (GDP)—the highest in Asean-5, estimates of UK-based Oxford Economics provided to the Inquirer showed.
In an e-mail, Oxford Economics economist Thatchinamoorthy Krshnan told the Inquirer that this estimated loss of output to date was “partially due to the relatively earlier start of lockdown measures in the Philippines and partially the stringency of the measures,” referring to the enhanced community quarantine (ECQ) extended until mid-May in areas with high COVID-19 cases.
According to the Philippine Statistics Authority (PSA), the Philippines’ GDP stood at P19.52 trillion in 2019, such that Oxford Economics’ estimated lockdown impact so far was about P1.13 trillion.
Across the bigger Asia-Pacific region, the estimated loss of output from lockdown in the Philippines was only exceeded by losses incurred by India and China, the latest Oxford Economics data showed.
Citing Google mobility reports for Asean-5 countries—which, besides the Philippines, included Indonesia, Malaysia, Singapore, and Thailand—Krshnan said that “the Philippines saw not just the sharpest falls in mobility trends over the last two months but also relatively earlier falls.”
“First-quarter [GDP was] impacted by the lockdown on the last two weeks (with other non-lockdown measures such as a drop in foreign tourists also playing a role) but the brunt of the lockdown impact will be observed in the second quarter,” Krshnan said.
The government on Thursday reported that GDP contracted by 0.2 percent year-on-year during the first quarter, cutting short 84 straight quarters of growth.
“Even in the scenario that the lockdown measures are eased, normalization would likely only happen in stages to prevent a second wave of infection,” Krshnan noted.
Asked if the ECQ was a good or a bad thing, Krshnan replied: “One way to understand the lockdown is within the capacity of the health care system to deal with a rapid rise in cases.”
“Within the Asean-5 economies, the Philippines has the lowest number of critical care beds (per 100,000 population) and a rapid rise in the number of COVID-19 cases leading to more people needing access to these beds could quickly overwhelm available resources and lead to preventable deaths.”
“By attempting to flatten the curve earlier on, it also provides the government more time to deploy resources to improve the absorptive capacity of the healthcare system and relax restrictions simultaneously to support economic activity,” Krshnan added.
In a separate report titled “Philippines: Lockdown leads to Q1 contraction, Q2 to be much worse” on Thursday, Krshnan said that “plummeting private consumption, contraction in private investment and plunging inventories more than offset the substantially positive contribution from net exports” during the first three months.
For Krshnan, “the outlook for the second quarter is even more bleak—a gradual relaxation of the containment measures, against an extremely weak global backdrop, is expected to push growth to negative 6 percent year-on-year in this quarter and pull-down growth for the full year to negative 2 percent.”
“The contraction in economic activity in the first quarter was primarily caused by a sharp drop in private consumption growth, which slowed to just 0.2 percent year-on-year from 5.7 percent in the fourth quarter of 2019 as a result of the Luzon lockdown from March 17. “
“Government consumption growth fell to 7.1 percent from 17 percent in the fourth quarter of 2019 as the effect from the government’s spending catchup plan last year waned.”
“Private investment growth contracted 4.3 percent as durable equipment contracted for the fourth consecutive quarter on poor business sentiment and construction growth fell 3.4 percent.”
“The fall in domestic demand caused import growth to contract by 9 percent, compared to export growth falling 3 percent, resulting in net exports becoming the largest contributor to growth in the first quarter,” Krshnan explained.
Moving forward, Krshnan said that “the worst is not over yet” for the Philippine economy amid the COVID-19 pandemic.
“We expect growth to contract much more in the second quarter as the impact from the coronavirus containment measures continue to materialize,” the economist said.
“Although increased health care and social security spending should see government consumption pick up, lower external demand and only a gradual relaxation of containment measures are expected to keep the growth outlook quite weak this year,” Krshnan said.