Quarantines, low vaccine procurement could slow rebound
It would take the Philippine economy longer than its Southeast Asian peers to return to its pre-coronavirus crisis growth levels on account of the government’s nearly yearlong, continuous lockdowns, according to Citigroup’s chief Asia economist.
At Fitch Ratings’ virtual conference on Tuesday, Citigroup’s Johanna Chua believed the country would take a longer time to recover from the pandemic’s economic impact than its regional neighbors, like Malaysia and Thailand, saying “we actually don’t see them (pre-2020 growth levels) coming back in 2022.”
According to her, the economy was hit hard by the government’s imposition of varying community quarantines in the country to curb the spread of the coronavirus.
These lockdowns severely impaired mobility, Chua said. She noted that “the Philippines is a lot more dependent on [the] services sectors and service-sector employment, so obviously it’s a little bit more impacted.”
To contain the spread of the coronavirus, the government has imposed different forms of community quarantines since March 17 last year, with the National Capital Region and the rest of Luzon placed under enhanced community quarantine (ECQ). This came more than a month after the first confirmed case — a tourist from the Chinese city of Wuhan, where the virus first emerged — was reported.
Metro Manila and select provinces were later put under general community quarantine in June, but returned to a stricter modified ECQ for two weeks in August as the number of Covid-19 cases surged.
The lockdowns dragged Philippine gross domestic product (GDP) by 0.7 percent in the first quarter, a record 16.9 percent in the second and 11.5 percent in the third, plunging the country into a recession. This brought the year-to-date GDP contraction to 10 percent.
Chua also cited the government’s current Covid-19 vaccine procurement efforts as another factor that could slow down recovery.
“We kind of track the supply. I think the Philippines is actually the one with the least procurement in Asean,” she said, using the acronym of the Association of Southeast Asian Nations.
Despite this, the economist said the government’s fiscal balance sheets were “very strong” and “the government can come in to provide some support” to economic-recovery efforts. She also cited the importance of the government’s “Build, Build, Build” infrastructure program to the economic rebound.
Also on Tuesday, economists at Australia-based ANZ Research said it was imperative that the government’s fiscal delivery improves this year.
“The evolving growth trajectory and our estimates of the output gap suggest that fiscal policy will need to remain supportive over the next two years,” they said in a report.
The fast delivery and full utilization of the P4.5-trillion national budget this year “will be critical in realizing complete pass-through of fiscal multiplier…” the economists added.
They noted that the 2021 appropriations renewed emphasis on infrastructure development, with P1.1 trillion, or 5.4 percent of GDP, was allotted to Build, Build, Build.
Meeting budget targets for welfare and social development is also critical amid a weak and vulnerable labor market, according to them.
“Fortunately, the Philippine government has considerable fiscal space, thanks to prudent debt management in the past,” the economists said.