IMF: COVID-19 containment key to firm economic recovery

MANILA, Philippines — Easing COVID-19 infections will redound to economic recovery, such that countries like the Philippines, which currently struggles with an elevated number of cases, need to intensify their health response to better fight the pandemic, the International Monetary Fund (IMF) has said.

“I would conclude that there is no solid firm foundation for economic recovery in the midst of an uncontrolled pandemic. So it is a prerequisite for a firm economic recovery that the virus curve be flattened,” IMF acting director for Asia and Pacific Jonathan D. Ostry told a virtual press briefing on the Washington-based multilateral lender’s Asia and Pacific Regional Economic Outlook report released last Wednesday.

Ostry was responding to the Inquirer, which asked about the quandary of the Philippines, Indonesia, and India — singled out by the IMF report among the slowest in containing the disease in the region, even as they needed to open up their economy to recover jobs and prevent more people from sliding back to poverty.

“Even early successes in this respect — there needs to be ongoing vigilance because, as we know, this is a marathon and not a sprint. The virus rears its ugly head from time to time when we do not expect it, and health policy needs to be very vigilant and proactive,” Ostry said.

Philippine officials had said there needed to be a balanced response to the COVID-19 pandemic wherein minimum health standards must be kept while gradually easing quarantine restrictions to resume livelihoods.

For Barcelona-based FocusEconomics, COVID-19 remained the top risk to the Philippines’ economic rebound.

“Growth should return next year on recoveries in both the domestic and external sectors, although possible further lockdown measures to contain the virus pose a key downside risk,” FocusEconomics said in an Oct. 20 report.

As such, FocusEconomics slightly cut its 2021 gross domestic product (GDP) growth forecast for the Philippines to 7.2 percent from 7.3 percent previously, both within the government’s target range of 6.5-7.5 percent for next year.

For 2020, FocusEconomics said that “while economic activity should recover somewhat in the fourth quarter, the economy will take a severe hit this year as a whole due to the prolonged domestic lockdown.”

FocusEconomics sees green shoots of recovery during the third quarter following the record second-quarter GDP contraction of 16.5 percent year-on-year, “although momentum was likely still shaky amid lingering restrictions on activity.”

“While the unemployment rate fell notably in the third quarter, it was still close to double its pre-COVID-19 level, which, coupled with rock-bottom consumer sentiment and double-digit falls in consumer goods imports in both July and August, points to a constrained recovery in private consumption. In addition, the decline in merchandise exports softened in July to August from the second quarter but remained marked, while the manufacturing PMI [purchasing managers’ index] averaged higher in the third quarter than in the second quarter, yet still pointed to worsening operating conditions,” FocusEconomics said.

Also, “the government appears to have adopted a more cautious fiscal stance in the third quarter amid concerns over the budget deficit; as a result, public spending likely contributed less to the economy in the period,” FocusEconomics added.