Lockdown extension to delay recovery
The latest two-week extension until May 31 of the COVID-19 lockdown in the Philippines will hurt the economy some more and risk delaying recovery, London-based Capital Economics said.
“The Philippines faces at least two more weeks before the economic recovery will begin. We think GDP (gross domestic product) will contract by 6 percent this year, which would make it one of the hardest-hit countries in the region from the crisis,” Capital Economics senior Asia economist Gareth Leather said in a May 12 report titled “Philippines: Lockdown extension to delay recovery.”
Capital Economics noted that the extended quarantine covered about 45 percent of the Philippine economy.
“The restrictions on economic activity, which are among the toughest in Asia, are having a severe impact on economic activity. The high-frequency activity data we track point to a much bigger hit to growth in the second quarter. Data from Google’s community mobility reports show that attendance at workplaces has fallen by nearly 60 percent since the crisis began. Congestion in Metro Manila has dropped precipitously, while routing requests according to data from Apple are just 20 percent of the normal level—the lowest in the region,” Capital Economics said.
As such, Capital Economics projected a 17-percent contraction in GDP during the second quarter.
The Philippines’ GDP shrank by 0.2 percent year-on-year during the first quarter—ending 84 quarters of growth since 1999—no thanks to Taal Volcano’s eruption and the COVID-19 pandemic, which not only slowed global trade and tourism but also forced a domestic lockdown to contain the disease.The first-quarter print increases the possibility of a recession or two consecutive quarters of economic contraction as the enhanced community quarantine imposed in Luzon and other parts of the country since mid-March had been already extended by four times in areas with high COVID-19 cases.
“Recovery should begin to take shape once restrictions start to be eased. A gradual pickup in global demand should also provide some support,” Capital Economics said.
Separately, UK-based Oxford Economics said that the Philippines and Malaysia were expected to lag behind their Asia-Pacific peers in bouncing back from the socioeconomic fallout caused by the COVID-19 pandemic due to slow containment of the disease.
“Asia-Pacific economies that have convincingly contained the coronavirus outbreak have seen workplace mobility recover to levels close to normal (China, South Korea, Taiwan, Hong Kong and Vietnam) or are moving in that direction (Australia and Thailand). These economies will lead the economic recovery. Other Asia-Pacific countries that have not succeeded in fully containing the virus will lag the upturn,” Oxford Economics head of Asia economics Louis Kuijs said in a May 12 report titled “Containing the virus is the key to recovery.”
“Malaysia and the Philippines have also made progress with containment, but not yet decisively. With less room to ease restrictions, we expect their economic recovery to lag that of [Australia, Thailand and Vietnam],” Oxford Economics warned.
Oxford Economics noted that the Philippines, Australia, Malaysia, Thailand and Vietnam were hit by the pandemic at around the same time—later than the outbreak that started in China and later spread to Hong Kong, South Korea and Taiwan.
“In the second half of March, all these [five] governments started to implement increasingly stringent restrictions on the movement and gathering of people, especially the Philippines and Thailand,” Oxford Economics said.
In the case of Australia, Thailand and Vietnam, Oxford Economics noted that these three countries had been “able to lift some [restrictions] following good progress with COVID-19 containment.”
However, Oxford Economics said that the Philippines and Malaysia were lagging behind in containing the disease.