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The Philippine economy may lose around P1.1 trillion due to the 2019 coronavirus pandemic (Covid-19), according to the National Authority for Economy and Development (Neda).
In an online briefing with the Philippine Foreign Correspondents Association on Thursday, Secretary for Socioeconomic Planning Karl Kendrick T. Chua told reporters that this estimate assumes that GDP growth will be zero this year.
Chua also took into account revised and modified estimates for GDP published by the Philippine Statistics Authority (PSA), which set GDP at around P18.6 trillion in 2019.
“Those are the numbers that I am translating for you based on the pronouncement that the GDP will be flat and so far the survey seems to say that it is not very far because the survey says that P700 billion in losses, according to the people we interviewed,” Chua said.
Optimism in the country’s GDP growth figures has been running out, and Chua said it would not be a surprise if GDP growth in the first quarter did not go as well as expected.
3 factors
Chua said the economy was affected by three exogenous factors in the first three months of the year that may have undermined the country’s growth prospects.
These factors are the eruption of the Taal volcano; the decline in Chinese tourist arrivals and trade, which also affected the local tourism industry and commercial sector; and the imposition of Enhanced Community Quarantine (ECQ) in March.
The PSA will release official first quarter GDP growth estimates on May 7.
“I am new here, but I have a feeling that we have good potential to see positive growth. [But] We shouldn’t be surprised if the numbers aren’t in our best favor, “Chua said.
In addition to slow growth, the pandemic is likely to increase the country’s debt-to-GDP ratio to around 46 percent to 47 percent from the current estimate of 40 percent.
Chua said that with the lack of revenue that the government can raise in light of the ECQ, the government can turn to loans.
To date, the Philippine government has obtained grants and loans worth $ 3.733 million from multilateral agencies, the Asian Development Bank and the World Bank.
However, Chua said any increase in debt will be manageable considering that the Philippines was already on the brink of a fiscal crisis in 2004 with a debt-to-GDP ratio of more than 80 percent; the consolidated debt of the public sector exceeded 100 percent; and the budget deficit reached 6 percent.
Chua said having a debt-to-GDP ratio of 41.5 percent from last year now gives the country some fiscal space to guarantee low-cost loans, something that was unimaginable in the early 2000s.
“We are in a very good position to borrow because our economy is in a very good position. We have a history and we place tax reform as our capital contribution, ”said Chua.
Elevation ECQ
Amid these bleak expectations, lifting the ECQ in some areas will help boost the economy. Several provinces are expected to enter the General Community Quarantine (GCQ) phase starting Friday, May 1.
Chua said that with 75 percent of economic activities returning to normal under GCQ, the economy still has a prayer for positive GDP growth this year. He said economic activities, as long as basic health care protocols are followed, will be allowed and can give the economy a much-needed boost.
The Neda chief said being cautious about lifting the ECQ is one way the economic team and the Inter-Agency Task Force for Emerging Infectious Disease Management (IATF-EID) will ensure a sustained economic recovery.
“We already know from other countries that too hasty a decision without the necessary preparation can lead to a second or third wave. And that’s worse, actually. We would like to better prepare and recover and maintain that. We don’t want a recovery followed by a sudden collapse again, “Chua said.
New Hope
Chua said that one of the possible growth engines of the economy in the Philippines after Covid-19 would be the agricultural sector.
He previously explained that all activities related to the agricultural sector and food production, as well as delivery, are allowed, even under the ECQ.
As such, the government can ensure that the country has a sufficient food supply during the shutdown and allow growth in the agricultural sector to see much-needed improvement.
The government, he said, also has tools in its arsenal to support farmers like the Land Bank of the Philippines and programs like SureAID and the Rice Competitiveness Enhancement Fund (RCEF).
Chua said, however, that what is needed is to increase the sector’s productivity. For years, the agricultural sector grew just 2 percent, the country’s average population growth rate.
“The growth of agriculture barely exceeded the growth of the population in recent years. That suggests that we cannot even feed our own people if we cannot grow at least 2 percent each year, “said Chua.
“We are going to put a lot of effort in improving agriculture and this requires what we really did in the case of rice. We opened the sector but we invested a lot of money in mechanizing, obtaining high-yielding seeds and all the support so that once and for all, we make agriculture very productive, ”he explained.
Meanwhile, Chua also reiterated that the Build, Build, Build program will also be accelerated once the government can ensure that workers can safely continue these projects.
Chua said the BBB program remains one of the government’s key strategies to recover from the economic losses caused by the pandemic.
After establishing the “new normal,” Chua said, the government will prioritize which projects would have the greatest impact on the economy and accelerate these projects.
The BBB program can also help Filipino Returning Overseas (OFW) workers obtain employment. Chua admitted that the country had a shortage of quality workers in the construction sector and that OFWs could fill this gap if they decided to stay in the country.
However, Chua is confident that with the excellent brand of service that Filipino workers have established worldwide, many OFWs will be able to return abroad.
Previously, in a Policy Brief from the Ateneo de Manila University (ADMU), the Director of the Ateneo Center for Economic Research and Development (ACERD), Alvin P. Ang, and the Executive Director of the Institute of Migration and Development Affairs (IMDI ), Jeremaiah M. Opiniano, estimated around 300,000 to 400,000. OFWs will be laid off or suffer pay cuts due to the pandemic.
Ang and Opiniano said this will likely reduce OFW remittances by 10 to 20 percent or as much as $ 3 billion to $ 6 billion, “the largest decline in remittances in the history of Philippine migration.” This means that remittances could only reach $ 24 billion to $ 27 billion this year from $ 30 billion in 2019.
“These worst-case-base scenarios are significant numbers that affect the economy externally and then internally. With remittances from Filipinos abroad fueling domestic consumption, we can lose 20 to 40 percent of consumption due to the transfer effect of remittances, “Ang and Opiniano said.
Covid-19-induced blockades and work stoppages have put world economies in limbo. Multilateral institutions, as well as international and local think tanks have painted a bleak picture for global GDP growth this year.
On March 17, President Duterte imposed an Enhanced Community Quarantine (ECQ) on the entire island of Luzon, where the regions of the National Capital, Calabarzón, and central Luzon are located. The three regions represent 60 percent of the country’s GDP. Luzon’s one-month ECQ lasted until April 30; and once again until May 15, but this time for Metro Manila and nine other areas in Luzon, the Visayas and Mindanao are considered to be at high risk of infection.
The government also expects the return of thousands of OFWs due to work disruption, particularly between cruises and ocean liners, due to Covid-19.
Ang and Opiniano said another concern when it comes to the OFW plight is declining oil prices. They estimate that if the current trend continues, more Filipinos in the oil-rich Middle East will either be out of a job or cut wages.
