Intelligent Investing

Why the growing number of COVID-19 cases is bad for the economy

In the past, we said that a continuous increase in the number of COVID-19 cases is one of the biggest risks facing the country in ensuring a sustainable economic recovery.

This risk is now threatening to become a reality. From less than 500 in April and May, the number of daily new cases has jumped to 1,500 to 2,500 in July. Because of this, the government has raised the possibility of bringing Metro Manila back to modified enhanced community quarantine (MECQ) status from general community quarantine (GCQ) if the number of COVID-19 cases exceeds 85,000 by the end of the month. This is a highly probable scenario given the elevated number of daily new cases that the country registers.


Returning to MECQ is worrisome. Although a lot of businesses can still operate under MECQ, public transportation will be restricted. This would prevent a lot of businesses from opening since their employees cannot report to work. Although companies can provide shuttle service or housing for employees near their places of work, not all will be willing to do so since revenues that will be generated from staying open might not be enough to cover the additional costs.

Moreover, under MECQ, most businesses that can operate will be allowed to do so at a lower capacity. For example, restaurants can only service orders for takeout and delivery, while dine-in services will not be allowed. This could push some restaurants to close permanently since a lot of them are barely breaking even, even under GCQ.


As businesses generate less revenues, they will be forced to either reduce the number of employees’ work days or to permanently lay off some employees. This would mean a higher unemployment and underemployment rate, weaker consumer spending and slower economic growth.

Although there is a possibility that the government will decide against bringing Metro Manila back to MECQ status and instead choose to adopt localized lockdowns given the severe economic implications of a Metro Manila-wide lockdown, the government will still have to prioritize measures to control the spread of the disease.

Even without a strict lockdown, the continuous increase in the number of new cases will cause Filipinos to act cautiously. According to the latest Social Weather Stations survey, 85 percent of Filipinos are still worried about being infected with COVID-19, hardly changed from the 87 percent in May.

Increased cautiousness will itself cause weaker economic growth. Sweden, for example, still expects its economy to contract by 4.5 percent this year. This is despite not imposing strict lockdown measures but instead relying on citizens to voluntarily stay at home and practice social distancing in public.

Let us hope and pray that the government will succeed in controlling the spread of the virus, and that it will successfully do this sooner rather than later. As individuals, let us do our part in helping the government by practicing self-quarantine when we are sick, wearing a mask and practicing social distancing when we are in public. INQ


For more news about the novel coronavirus click here.
What you need to know about Coronavirus.
For more information on COVID-19, call the DOH Hotline: (02) 86517800 local 1149/1150.

The Inquirer Foundation supports our healthcare frontliners and is still accepting cash donations to be deposited at Banco de Oro (BDO) current account #007960018860 or donate through PayMaya using this link .

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