Economic plunge

posted August 07, 2020 at 12:35 am
"The military-style lockdown in the Philippines has not worked."

The Philippine economy, as expected, plunged in the second quarter of the year, weighed down by the prolonged COVID-19 lockdown that shut down businesses and put millions of Filipinos out of work. The economy shrank 16.5 percent in the April-June period, the sharpest decline on record, officially bringing the Philippines into a recession after a 0.7-percent contraction in the first quarter.

The Philippines fared worse than its peers in Southeast Asia. The local economy slumped 9 percent in the first six months of 2020 compared with a contraction of 1.2 percent in Indonesia, 6.5 percent in Thailand and 3.9 percent in Malaysia. Vietnam, one of the earliest countries to close its borders with China, the origin of COVID-19, eked out a 2.1-percent growth.

The Philippines suffered the sharpest contraction in this part of the world due to the economy's bias toward the services sector and its consumption-driven nature. A strong consumer demand has driven the economy in the past, boosted by a growing labor market and robust remittances from migrant Filipino workers.

The business process outsourcing sector has employed millions, along with the real estate, and finance and insurance industries. But lockdown restrictions impaired the mobility of workers from these sectors, resulting in much-reduced consumption of goods and services.

Meanwhile, over 27 million people in Metro Manila Manila and the provinces of Laguna, Cavite, Rizal and Bulacan have been covered by varying lockdown degrees in the government's attempt to contain the virus spread. The capital region and the four neighboring provinces account for about 67 percent of the country's economic output.

Consumer spending in the second quarter, as a result, plunged 15.5 percent in the second quarter. This meant lower factory production in response to the reduced consumption of workers, many of whom lost their jobs because of the pandemic.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno, however, is cautiously optimistic, saying the “worst is behind us,” although “we are not out of the woods yet.” He notes that economic activity has picked up after certain businesses were reopened.

The military-style lockdown in the Philippines has not worked. It disrupted business operations and rendered many workers jobless. Authorities now know that the damage on the economy is severe after the release of the second-quarter gross domestic product figures. No government can handle the twin threats of pandemic and civil unrest.

Topics: Editorial , Economic plunge , Philippine economy , COVID-19
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