"But prospects remain precarious."
Overwhelmed by the people’s 91-percent unprecedented job approval and trust ratings for their president, Rodrigo Roa Duterte is returning their gesture of solid support.
The world’s—and history’s-- most popular strongman will now relax the globe’s severest and longest lockdown to reopen the Philippine economy and bring things to a level a bit short of pre-COVID-19 normalcy.
People aged 21 to 60 can now go out without permits. Public transport operates at 50 percent of capacity. Nearly all industries can restart their factories. Restaurants will still have less restricted operations. Churches can take in only a third of capacity. But expect to celebrate the 16-day midnight masses before Christmas, although at half of the crowd attendance last year.
Begun on March 15, 2020, the series of lockdowns shut down 75 percent of the economy, shut down 70 percent of businesses, laid off easily 20 million workers, made three of every ten Filipinos hungry, and impoverished half of the country’s 23 million families.
Of the 20 million workers rendered jobless, seven million will never get back their old jobs. Official unemployment figure tripled from 5 percent in 2019 to almost 18 percent by the first half of 2020.
In the first three months of this year, the economy contracted by 0.7 percent; in the second quarter, it collapsed totally by 16.5 percent—the deepest contraction ever in the country’s history. For the first half, the economic output was reduced by 9 percent.
For the whole of 2020, economic production will decline by 8.3 percent, according to the International Monetary Fund. That is the deepest economic contraction year-on-year ever. The 8.3-percent nosedive also discounts recent reopening moves by the government. Some 5 million Filipinos who previously have escaped poverty will become poor again.
Government economists think the economy will recover fully in 2021, regaining its average growth of 6 percent in the past 20 years. That is being optimistic. Cynics think it will take at least three years for the Philippines to get back to its old GDP growth clip of 6 percent.
Duterte’s lockdowns hidden under various acronyms that only few people, excluding even some of his own cabinet members, understood, proved ineffective. Instead of COVID being contained dramatically as it was in China, Vietnam, South Korea, and Japan, the severe restrictions on people and production of goods made the Philippines the epicenter of the pandemic in Asia and for a while the 18th hardest hit among 220 countries in the world. They also made the Philippines among the world’s top economic laggards.
Per Worldometers, at this writing, 40.66 million have been struck by COVID-19; 1.123 million have died.
The Philippines is No. 20 in number of cases, with 360,775, having been overtaken by Indonesia, with 365,240 cases. Indonesia has 12,617 deaths, almost double the Philippines’ 6,690. Indonesia and the Philippines are the hardest-hit countries of ASEAN; because of that, their economic outlook is uncertain, says IMF.
Cases in the Philippines peaked at 6,871 per day on August 10, 2020. Since then, they have steadily declined to 1,811 cases per day on Oct. 14 and have stabilized at 2,604 as of Oct. 19.
As to the much-touted vaccine, well, don’t bank on it too much. To reach what they call herd immunity, up to 70 percent of the population have to be vaccinated, according the chief scientist of the World Health Organization. Herd immunity means a sick person will infect only one other person (1x1 equals 1), stopping the virus from jumping from one person to many others.
Even with a vaccine, studies indicate immunity is good for only seven months. Which means every six months, one has to get vaccinated. That’s very expensive. The vaccine, if you consider the greed of drug companies, could cost as much as P20,000 per inoculation. Governments should give away it for free.
Meanwhile, among emerging market and developing economies, the IMF forecasts growth at –3.3 percent in 2020, 0.2 percentage point weaker than in the June 2020 WEO Update. Growth, however, strengths to 6 percent in 2021.
Prospects for China are much stronger than for most other countries in this group, with the economy projected to grow by about 10 percent over 2020–2021 (1.9 percent this year and 8.2 percent next year). Activity normalized faster than expected after most of the country reopened in early April, and second quarter GDP registered a positive surprise on the back of strong policy support and resilient exports.
For many emerging market and developing economies excluding China, prospects continue to remain precarious, IMF says
This reflects a combination of factors: the continuing spread of the pandemic and overwhelmed health care systems; the greater importance of severely affected sectors, such as tourism; and the greater dependence on external finance, including remittances.
All emerging market and developing economy regions are expected to contract this year, including notably emerging Asia, where large economies, such as India and Indonesia, continue to try to bring the pandemic under control.
The IMF growth projections imply wide negative output gaps this year and in 2021 as well as elevated unemployment rates across both advanced and emerging market economies.
India’s economy is projected to contract by 10.3 percent in 2020, before rebounding by 8.8 percent in 2021.
Growth for emerging market and developing economies excluding China is projected at –5.7 percent for 2020 and 5 percent for 2021.
The projected rebound in 2021 is not sufficient to regain the 2019 level of activity by next year. Growth among low-income developing countries is projected at –1.2 percent in 2020, strengthening to 4.9 percent in 2021.
Higher population growth and low starting levels of income imply that even this more modest contraction compared with most emerging market economies will take a very heavy toll on living standards, especially for the poor. The IMF growth projections imply wide negative output gaps this year and in 2021 as well as elevated unemployment rates across both advanced and emerging market economies.
For the long term, among emerging market and developing economies, growth is projected to decline to 4.7 percent by 2025, well below the 5.6 percent average of 2000–2019.