Philippine Economic Society (PES)
THE economy can no longer stay on lockdown, and prolonging the mobility restrictions would condemn even more Filipinos to poverty and hunger, according to the National Economic and Development Authority (Neda).
In a briefing on Thursday, Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said this is the economic team’s stance despite the presence of a new Covid-19 strain in the country.
Chua led the briefing after the economy posted its worst annual performance on record—a contraction of 9.5 percent—in 2020. Spending in the last quarter of the year also failed to prop fourth-quarter economic performance, which contracted 8.3 percent.
“We cannot afford any more prolonged quarantines, or risk aversion. We have to strike that better balance, and we will continue to use data, both from the economic and the health side, to inform our decision, and our recommendation to the President,” Chua said.
Based on Neda estimates, Chua said quarantine restrictions reduced household spending by P801 billion in 2020 or an average of around P2.2 billion per day.
Chua said the decline in consumption translated into a total income loss of around P1.04 trillion in 2020 or an average of around P2.8 billion per day.
On a per capita basis, Chua said annual family income declined by some P23,000 per worker. However, he said this masked wide differences across sectors and jobs since some workers were hit much harder, while others lost their jobs completely.
P1-trillion productivity loss
Apart from these, Chua cited an Asian Development Bank (ADB) study that P1 trillion in productivity will be lost if children do not go back to school.
“We have to live with the new strain and move on,” Chua told BusinessMirror after the press briefing.
Economists agreed with the economic team and echoed calls to open the economy to reverse the lockdown’s ill effects.
De La Salle University economist Maria Ella Oplas said loosening restrictions will not make the new Covid-19 variant any less real for Filipinos. After all, she said, there are reports of Filipinos testing positive for the new strain.
Except for schools, Oplas said, other sectors of the economy should start opening up. It would also do good for Filipinos to “enjoy the outdoors at regulated head counts” while wearing face masks and face shields.
“I think that instead of doing another round of lockdowns, the government should focus on the entry gates making sure that those coming do not come in most especially with the new strain,” Oplas said.
Ateneo Center for Economic Research and Development (Acerd) Director Alvin P. Ang told the BusinessMirror that loosening mobility restrictions would be possible as long as the “Test, Trace and Isolate system” is still implemented.
Ang said market jitters about the new strain in the country and loosening restrictions need not be “inconsistent” as long as the government is consistent in enforcing protocols.
Former Philippine Economic Society President Emilio S. Neri Jr. said the business community is committed to increase its investments, ensuring that even if new variants come out, firms can sustain their growth and profitability.
These investments, Neri said, include those that improve logistics, transport, telcos, farms and manufacturing. These new investments will be done while repurposing their resources.
“What I worry more is the speed of economic recovery, which won’t take a faster pace unless the government abandons the GCQ, etc. method which is a shotgun approach that impedes people and goods movement (resulting also in varying requirements, including testing, for different municipalities, provinces). A corollary to this would be to limit LGU to at most barangay level lockdowns (i.e., it could be blocks or several blocks usually),” University of Asia and the Pacific economist Victor A. Abola said.
Quid pro quo
However, Foundation for Economic Freedom (FEF) President Calixto V. Chikiamco said more needs to be done before the economy can open.
Government must ensure that Filipinos are protected from Covid-19 strains, and must keep out travelers from countries where these variants are raging, Chikiamco said, adding that a variant surveillance and regular testing must be sustained.
For former Socioeconomic Planning Secretary Romulo L. Neri, the government can already loosen restrictions with the presence of fast and cheaper testing.
Neri urged Secretary Francisco Duque III to look into Ivermectin as a potential prophylactic and curative.
A new, cheaper quick-result saliva test will also help, Neri said.
Abola said LGUs should also provide UV-light disinfection centers for public transportation and implement good governance in issuing permits for the free movement of goods.
The government or the Bangko Sentral ng Pilipinas (BSP) through rural banks and microfinance institutions should provide emergency lending facilities to MSMEs payable in seven years, with a two-year grace period.
The BSP, through commercial banks, should provide emergency lending facilities to large companies to support their supply chains, he said.
Other proposals he listed: creating new vegetable-growing centers closer to Metro Manila, such as Tanay in Rizal and Tagaytay, to facilitate access to ample and affordable food supply; and accelerating infrastructure spending to facilitate movement of goods and people and health.
“Infra spending, which has long-term positive effects, is basically horizontal and affords natural social distancing. It’s more the sleeping and eating facilities that contractors have to be careful about,” he added.
Meanwhile, Action for Economic Reforms (AER) coordinator Filomeno Sta. Ana III noted that the new Covid-19 variant only shows that the vaccine is no silver bullet.
He said new mutations of Covid-19 could come out and “first-generation vaccines” may not be able to address the risks brought by these new strains on Filipinos.
Sta. Ana said this poses risks, especially given the “bungling” of the country’s vaccination strategy. He said the economic team needs to consider containing the virus first before opening up the economy.
Recovering
Amid the economic challenges, Chua and the rest of the economic team believe the prospects for 2021 remain encouraging, largely due to the possibility of a “calibrated reopening of businesses and mass transportation, and the relaxation of age group restrictions.”
Chua thinks this will lead to a strong recovery, especially if the government’s plan of distributing vaccines against Covid-19 before yearend is implemented.
The government is also relying on its recovery package—the Bayanihan to Recover as One Act (Bayanihan 2); 2020 and 2021 budgets; and reform bills, he added.
These bills are the CREATE, which aims to lower taxes and give tax incentives; FIST on addressing liquidity problems of firms; and GUIDE on addressing solvency problems of firms.
Extending the use of Bayanihan 2 and the 2020 budget combined will give an additional P195-billion boost to the economy.
A package approach, Chua said, is a better way to help the economy recover instead of just extending grants such as the Social Amelioration Program (SAP).
Chua said if consumer confidence is down or low, providing subsidies will not help the economy. If families cannot go out and spend the SAP or subsidies, this will not translate to economic growth.
He cited surveys done by Neda showing SAP or ayuda is not among the needs of Filipinos at this time. What they said they needed are deferment of fixed payments; rental loan utilities; and deferment of taxes and lower taxes—all of which cannot be resolved by extending fixed financial grants.
“There is I think no point in giving more fiscal stimulus, if for instance, there is no confidence or consumer confidence to spend. There’s no point in giving more subsidies, if the families cannot even go out and spend,” Chua said. “We have to give the support not only from one instrument, but from a package to address multiple concerns of businesses and individuals.”
Economic performance
Crippled by lockdowns, the Philippine economy posted a contraction of 9.5 percent in pandemic year 2020, the worst performance on record since 1946, according to data released by PSA on Thursday.
In a briefing, National Statistician Claire Dennis S. Mapa said economic growth was the worst since the PSA started collecting annual data in 1946.
Mapa said the fourth quarter also saw the economy contract 8.3 percent, despite the holidays.
“In the fourth quarter of 2020, our economy performed better with a smaller GDP contraction of -8.3 percent. This brings the full-year GDP contraction to -9.5 percent, which is at the low end of the DBCC estimate of -8.5 to -9.5 percent for 2020. On a quarter-on-quarter basis, the economy grew by 5.6 percent,” Chua said.
The top contributors to the decline of GDP growth for the fourth quarter of 2020 were construction, which declined 25.3 percent; other services, 45.2 percent; and accommodation and food service activities, 42.7 percent.
Among the major economic sectors, agriculture, forestry, and fishing (AFF) registered a contraction of 2.5 percent in the fourth quarter of 2020. Services and industry posted declines of 8.4 percent and 9.9 percent, respectively.
In 2020, PSA said AFF contracted 0.2 percent; services, 9.1 percent; and industry, 13.1 percent.
On the expenditure side, PSA said the Government Final Consumption Expenditure (GFCE) posted positive growth of 4.4 percent in the fourth quarter of 2020.
Household Final Consumption Expenditure (HFCE) declined by 7.2 percent, along with the Gross Capital Formation (GCF) at 29 percent; exports, 10.5 percent; and imports, 18.8 percent.
For the whole of 2020, GFCE grew by 10.4 percent while HFCE contracted 7.9 percent; GCF, 35.8 percent; exports, 16.7 percent; and imports, 21.9 percent.
PSA data showed Net Primary Income (NPl) from the Rest of the World, and the Gross National Income (GNl) contracted 53.2 percent and 12 percent in the fourth quarter of 2020, while full-year 2020 growth rates of NPI and GNI declined 27.3 percent and 11.1 percent, respectively.