Recovery at risk due to slow COVID vaccine plan

While multilateral lenders have committed to jack up loan financing so the Philippines can buy COVID-19 vaccines, the government’s procurement has been the slowest in the region so far such that economists worry that an economic rebound would also lag.

The latest World Bank documents showed the Washington-based lender’s upcoming additional financing for the Philippines’ COVID-19 Emergency Response Project to be implemented by the Department of Health was raised to $400 million as of Jan. 16 from $300 million previously.

As such, the total commitment across 14 loans in the World Bank’s near-term lending pipeline for the Philippines rose to $2.9 billion.

Besides the World Bank loan for vaccine procurement and distribution, the Manila-based Asian Development Bank has also committed $325 million under its Asia-Pacific Vaccine Access Facility while the Beijing-based Asian Infrastructure Investment Bank is reviewing financing requests from member-countries, including the Philippines.

Despite a flurry of available financing, Citigroup managing director and head of Asia-Pacific economic and market analysis Johanna Chua told a webinar organized by debt watcher Fitch Ratings on Tuesday that the Philippines was a laggard in the region in purchasing COVID-19 vaccines.

“When it comes to vaccine procurement and we kind of track the supply, I think the Philippines is actually the one with the least procurement. In Asean (Association of Southeast Asian Nations), Singapore seems to be a little bit ahead, and then Thailand’s a little bit more than Malaysia [which was] sort of in the middle, and the Philippines

a little bit lagging,” Chua said.In a report, London-based Capital Economics said that while “a vaccine should eventually prove a game-changer for the economy,” the Philippines has so far “only secured a small number of doses and faces many logistical challenges to achieving widespread vaccination.”

For Chua, a revert to pre-pandemic gross domestic product (GDP) levels “may take longer” in the Philippines or up to 2022 even as other Asian countries, which also suffered from huge numbers of infections like India and Indonesia, could bounce back sooner.

Chua said it did not help that the Philippines has been under prolonged quarantine such that mobility restrictions badly hit the services sector and its workers—among the bigger contributors to the domestic economy

Chua was also worried that the Philippines’ private-sector investment boom pre-pandemic might not return as fast as it could post-pandemic.

“Even though the fiscal balance sheet is very strong so the government can come in to provide some support and that could help drive the infrastructure, I worry that the lag, the overhang on private-sector capex is going to take a lot longer to unwind going into post-rebound” from the pandemic-induced recession, Chua said.

According to Capital Economics, “the economic scars from the downturn, including business insolvencies, weaker household balance sheets and high unemployment, will weigh heavily on demand” this year such that consumer spending, which accounted for about 70 percent of the Philippines’ GDP, was “set to remain in the doldrums.”

“While new infections are past their peak, they remain high and social distancing is likely to remain a drag on the economy throughout 2021,” Capital Economics said.

For Capital Economics, the Philippines’ “failure to contain the virus and lackluster fiscal support means it will experience one of the slowest recoveries” in the Asia-Pacific region.

“The economy has been slow to rebound so far. We estimate the GDP is still 8-percent below its pre-crisis level and even by the end of 2022 output is still likely to be 7.5-percent below the level it would have been had the crisis not happened,” Capital Economics added. INQ