The country’s economic recession may continue in the first quarter with the resumption of stricter lockdown measures implemented by the government in Metro Manila and adjacent provinces to prevent the spread of COVID-19 pandemic, an economist said Tuesday.
ING Bank Manila senior economist Nicholas Mapa said in a report that the lockdown measures implemented within a “bubble” would set back the Philippine comeback story a couple more months as business activity is curtailed and the already fragile consumer confidence took yet another blow.
“The Philippines is now neck-deep in a recession, posting four straight quarters of contracting GDP with the streak now all but likely to hit five,” Mapa said. The country entered a technical recession as early as the second quarter of 2020, when the gross domestic product contracted by 16.9 percent.
He said the base effects would ensure that second-quarter GDP would post “growth” but only by virtue of how steep a drop was posted during the height of the enhanced community quarantine last year.
“Despite the implicit guarantee of ‘growth’ this year, authorities and analysts remain cognizant of the fact that the economy has stalled and the once zooming economy is now sitting idle in the driveway,” he said.
Mapa said amid the pandemic, latest data showed that unemployment rate stood at 8.7 percent, inflation at 4.7 percent, while the economy contracted by a record 9.5 percent in 2020, the worst since the end of World War 2.
He said that due to the surge in COVID-19 cases, the government placed Metro Manila and the four provinces of Laguna, Bulacan, Cavite and Rizal under a general community quarantine bubble with a new set of regulations.
Residents of Metro Manila and the four provinces are not allowed to go outside the bubble, while residents outside the bubble are not allowed entry except for purposes deemed by the government as “essential”.
Mapa said the economy was slated to return to the pre-pandemic GDP levels by the third quarter of 2022 and the two-week “bubble down” pushed that back to fourth quarter of next year.
“Once again, we see how the health crisis and the economic struggles of the Philippines are intertwined with the recovery likely never happening until COVID-19 is completely and successfully quelled,” Mapa said.
He said while authorities resorted to a string of measures in the form of corporate tax cuts and funding for loans, these structural reforms would only provide a boost to the economy if the economy was up and running.
Mapa urged the government to change strategy to revive the stalled economy. He said the longer the economy remained in recession, the more vulnerable it would be to the scarring effects from the pandemic with business closures mounting and unemployment at elevated levels.
“With monetary policy hitting the inflation wall early in 2021, the only move the ‘whole of government approach’ may have left is to go for the ‘jump start,’ a move that would be viewed as ‘costly’ but one that may be more effective than what has currently been rolled out,” Mapa said.
The National Economic and Development Authority supported the localized quarantine measures in areas showing high transmission rates as directed by Resolution 104 of the Inter-Agency Task Force on the Management of Emerging Infectious Diseases.
Acting Economic Planning Secretary Karl Chua said that while NEDA recognized the risks associated with the recent spike in COVID-19 cases, reverting back to a stricter and blanket community quarantine was “no longer an option knowing how much it has cost the Filipino people in the past year.”
“The issue is not simply economy versus health. It is about addressing the total health of our people, whether from COVID, non-COVID sickness, or hunger,” he said.
Chua said the recent surge in number of cases compelled the government to act swiftly to slow down the infection rate. He said over the next two weeks, the government would strengthen the implementation of the “Prevent, Detect, Isolate, Treat and Recover” strategy and continue rolling out the vaccination program.