PH economic recovery seen slowing without easing of COVID-19 quarantine, crawling vaccination program

MANILA, Philippines—The Philippine economy was projected to grow at a slower pace in the first quarter of 2021, compared to an increase in output in the fourth quarter of 2020, as a result of a decision to keep in place current COVID-19 quarantine restrictions until an elusive mass vaccination is rolled out.

In a statement on Tuesday (Feb. 23), acting Socioeconomic Planning Secretary Karl Kendrick Chua said the state planning agency National Economic and Development Authority (Neda), which he heads, “supports the recent decision of the President not to shift to MGCQ” or modified general community quarantine. MGCQ is the least stringent level of restrictions to prevent transmission of SARS Cov2, the virus that causes COVID-19 and which had turned humans as its carriers.

Last week, Chua urged President Rodrigo Duterte to place the entire Philippines under MGCQ to address higher rates of hunger and unemployment in areas under stricter quarantine measures, which included business and financial hub Metro Manila, amid a still elevated number of COVID-19 infections.

Chua told the Inquirer last Sunday (Feb. 21) that a uniform, nationwide MGCQ would allow as much as 95 percent of economic activities to resume.

But the President on Monday (Feb. 22) said the whole country cannot move to a more relaxed quarantine without a mass vaccination program in place.

Chua said “the whole of government will work hard, in cooperation with various sectors, to roll-out the vaccine so that we can further open the economy.”

In a Feb. 22 report, UK-based Oxford Economics projected the Philippines’ GDP to eke out about 1 percent in quarter-on-quarter growth during the first quarter of 2021.

However, this increase in output would be slower than the 5.6-percent quarter-on-quarter growth posted in the fourth quarter of 2020.

During the third quarter of 2020, GDP rose 8 percent compared to the economic trough in the second quarter, when 75 percent of the economy froze under the most stringent enhanced community quarantine (ECQ) imposed from mid-March to May 2020.

The Philippines would nonetheless be among a few countries whose first-quarter GDP would exceed the previous quarter’s output, as Oxford Economics said “a large number of economies that expanded in the fourth quarter [of 2020] are expected to shrink in the first quarter [of 2021].”

Globally, “the broad slowdown in the first quarter is largely a reaction to tighter activity restrictions” as new and more contagious virus variants were detected at the start of the year, said Ben May, Oxford Economics director of global macro research, in a report.

In a separate Feb. 22 report, Oxford Economics head of global strategy and emerging market macro research Gabriel Sterne and economist Tianchen Peng pointed to “upside” risks to GDP in bigger emerging markets like the Philippines, Brazil, Egypt, India, Indonesia, Mexico, and South Africa.

However, economic scars wrought by COVID-19 may take longer to heal in the Philippines, Colombia, Peru, and Spain, they said in their report.

Also, UK-based Capital Economics on Tuesday (Feb. 23) said that while new coronavirus cases seemed to have peaked in the Philippines, Indonesia and Malaysia, “the slow vaccine rollout means that restrictions will need to remain in place for longer, holding back the economic recovery” in these three countries.

Capital Economics senior Asia economist Gareth Leather and Asia economist Alex Holmes pointed out that mass inoculation had yet to start in the Philippines.

Across Asia, “production delays and administrative problems are likely to hold back the rollout” as  “many countries are unlikely to get a steady supply of vaccines until the second half of the year.”

“Vaccine hesitancy could also delay the rollout,” said Capital Economics in a report.

It cited a YouGov survey which showed than less than half of the population of Hong Kong, Taiwan and the Philippines “would definitely take a vaccine if one was offered.”

“Our working assumption is that for most places it will take around 12 months for the most vulnerable to be vaccinated,” Capital Economics said in its report.

“Overall, the slow vaccine rollout reinforces our view that most economies will remain depressed for some time to come, and that policy will need to remain supportive,” it said.

“We expect central banks in Indonesia, the Philippines, Malaysia and Vietnam to cut interest rates further over the coming months, and that policy rates in the rest of the region will remain at very low levels for the considerable future. Fiscal policy will also remain loose—there is little sign of policymakers wanting to tighten fiscal policy prematurely,” Capital Economics said.

TSB