PRESIDENT Duterte will act next week on the recommendation of the National Economic and Development Authority (Neda) to start a new round of easing on quarantine measures by March after consulting Cabinet members, Palace officials said on Tuesday.
This, as local economists said that while placing the entire country under Modified General Community Quarantine (MGCQ) by March—as Neda proposed—will boost household consumption, it will not be enough to propel such to pre-pandemic levels.
On Monday night, Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said the Inter-Agency Task Force (IATF) for the Management of Emerging Infectious Diseases has recommended placing the entire country under MGCQ, the least stringent lockdown level, by March 1.
Presidential spokesman Harry Roque said in a virtual press briefing on Tuesday from Davao City, “The President is still studying the recommendation and he wants it to be discussed in the next Cabinet meeting on 22nd of this month.”
Besides recommending a country-wide MGCQ, Neda proposed: increasing the available capacity of public transportation; adjusting the age group of those allowed to leave their homes during the pandemic—from 15 to 65 years old, to 5 to 70; and allowing the pilot of face-to-face classes.
Roque said he is among the Cabinet members pushing for the easing of quarantine restrictions, to allow more businesses to resume.
Currently, he said, the economic impact of Covid-19 now outweighs its health-related effects. While Covid-19 infected over 550,000 people in the country, it also drove 23.7 million to hunger last year due to the economic slowdown caused by the pandemic.
The easing of quarantine restrictions is not expected to lead to a spike in the number of Covid-19 cases since most Filipinos still comply with minimum health standards such as wearing of face mask, Roque argued.
Boost, but not quite
Placing the entire country under MGCQ by March will boost household consumption but not back to pre-pandemic levels, local economists asserted.
Foundation for Economic Freedom (FEF) President Calixto V. Chikiamco told the BusinessMirror that consumption growth will return but will still be muted, especially with fears of unemployment still looming.
“There will be a boost if only because mobility restrictions will be eased, but until the pandemic is controlled and vaccination widespread, consumers will not spend wantonly and continue to save,” Chikiamco said.
“Also, as we are seeing, layoffs are continuing, especially as companies run out of reserves. Fear over job security will keep spending on a tight leash,” he added.
Ateneo Center for Economic Research and Development (Acerd) Director Alvin P. Ang told the BusinessMirror there is enough consumption demand should the country be placed under the more lenient MGCQ.
Ang expects consumption spending to increase this year due to low base effects. In the second quarter, he said, household consumption spending could already be in the black.
In the fourth quarter of 2020, Household Final Consumption Expenditure (HFCE) contracted 4.5 percent. It posted an average contraction of 5.6 percent in 2020.
Philippine Statistics Authority (PSA) data showed HFCE started contracting in the second quarter of 2020 at 13 percent, followed by the 7.2-percent decline in the third quarter.
“It looks like there is consumption demand because there was an uptick in December, but it did not cause a surge so people are confident based on the need to meet family and sharing. It is critical that by this we are consistent in the protocols,” Ang said, partly in Filipino.
The return of more robust household consumption is not expected for at least a year. Chua told the BusinessMirror that this could happen by mid-2022.
The middle of 2022 coincides with the Presidential elections. Election years, based on the country’s economic history, are boom years characterized by high GDP growth.
This has been termed as the country’s boom-and-bust cycles which occur when the economy experiences strong growth one year and weak growth the next. In the case of the Philippines, bust growth occurs during non-election years.
“We need to balance Covid-19 and hunger concerns to achieve more confidence,” Chua said. “We expect to reach that [household spending going back to pre-pandemic levels] in mid-2022.”
Tracing, testing
Ultimately, reviving consumption spending and the economy will take more than loosening mobility restrictions.
Action for Economic Reforms (AER) Coordinator Filomeno Sta. Ana III told the BusinessMirror that vaccination and other measures to reduce transmission will bring back what was lost in the lockdowns.
Sta. Ana said it is understandable for Filipinos to feel the worst is over as vaccines are introduced in many parts of the world.
However, he reminded everyone that infections in the country remain high.
“The situation remains precarious; our infections remain high. It is when we relax our guard that things get worse. Germany serves as a concrete example. It was a success story but it is now under strict lockdown,” Sta. Ana said.
The Philippines needs to do better in “case-finding, testing, quarantining and contact tracing,” he added.
He agreed with former Socioeconomic Planning Secretary Cielito Habito’s estimate that it would take three or more years before the country recovers from what was lost during the pandemic.
Habito had noted that it took the Philippines five to six years to recover from the recession in the 1980s—which was not as bad as the recession caused by Covid-19.
“A V-shaped recovery is already out of the question. The scarring is already deep. We can expect some recovery this year, but this can be attributed to the low base,” Sta. Ana told BusinessMirror.
Hysteresis
Chikiamco said getting back to pre-pandemic levels will take time, and could even involve “economic scarring or hysteresis.”
He said this could happen when there is an overhang of fear and job insecurity for some time even after the end of the pandemic.
Hysteresis happens when the skills of workers, who were unemployed over a long period of time due to a recession, deteriorate, making them unemployable.
However, Ang said the recession is not over yet and should this happen to Filipino workers, it is not because of the economic downturn.
“If ever people remain unemployed even after the economy improves, it is not necessarily hysteresis but the change brought about by Covid-19 to the underlying way of doing business,” Ang said.
“[This] is the most likely case since Covid-19 changed business so some types of work are no longer needed by the new normal,” he added.
De La Salle University economist Maria Ella Oplas agreed and said the government has continued investing in infrastructure projects that will help provide jobs to millions of Filipinos.
Many businesses also invested in the provinces, where the costs of living and doing business are not as high as in megacities.
Oplas said the MGCQ will help increase job opportunities. With less stringent mobility restrictions, more establishments will open, more workers will secure jobs, and more consumers will be able to go out and spend, she said.
“The experience will disperse development from urban to rural,” Oplas said. “A lot of businesses closed but many opened up shop, especially among MSMEs.”
Earlier, John Gokongwei School of Management Dean Luis F. Dumlao said “corona coma” was a term coined by renowned economist and Nobel winner Paul Krugman for what the lockdowns inflicted on the economy.
Dumlao said this has significantly affected the Philippine economy, which saw its trade deficit balloon and its overseas Filipino worker (OFW) remittances decline.
However, he said, one saving grace is remittances. Despite the number of workers who lost their jobs abroad, inflows from those who still had their jobs kept pouring in and offset the country’s trade deficit.
Nonetheless, as far as the pattern of recovery is concerned, Dumlao said it is appearing to be more of a “Nike swoosh” than a “V,” especially when it comes to the actual level of GDP.
In terms of GDP growth, Dumlao said, there may be some credence to the claims of the administration that a “V” shaped recovery is going to happen. This is because, as Ateneo Dean of Social Sciences Fernando T. Aldaba said, there’s “nowhere to go but up.”
