Gov’t must fully open up economy, jump-start recovery process
The government should now fully open up economic activities to help jump-start the Philippine economy devastated by the lockdowns imposed to curb the spread the dreaded Covid-19 virus.
Ben Punongbayan, Chairman and Founder of the Buklod National Movement, said: “It is now time to open up the economy much wider to reduce the continuing economic decline. It is a difficult choice of course, but with proper safeguards, the risk of fatalities may be minimized to a very small extent.”
For the first half of 2020, the Philippine economy has already declined by 9% compared with the first half of 2019. The International Monetary Fund (IMF), for its part, forecast for the Philippines an economic decline of 8.6% for the entire year 2020.
A close look at the supply side components of country’s Gross Domestic Product (GDP) for the first half of 2020, as reported by the Bangko Sentral ng Pilipinas, shows that the industrial sector—which includes construction, composing 29% of current GDP—declined by 13.5%; while the service sector, constituting 61% of GDP, declined by 8.2%.
On the demand side, household consumption, constituting a very large 72.6% of the current economy, dropped by 7.8%; while capital formation, composing 18% of current GDP, declined by 36.6%. The supply and the demand sides of the economy, being two sides of the same coin, are of course interdependent, one similarly affects the other in the direction they take.
Punongbayan said these declines were caused by the imposed lockdowns to prevent the wider spread of Covid-19 virus. It shall be noted though that the large drop of the economy for this half-year period, which includes only a little more than three months of the contagion, indicates also the fragile nature of the Philippine economy. To illustrate that fragility, the Philippines showed the worst GDP losses of a little more than 12%, according to the recently released issue of IMF’s World Economic Outlook. The study showed a comparison of its economic forecasts for the period 2020 to 2025 of countries around the world, from the update made in January 2020 to projections prepared in October 2020.
“The alternative of keeping a prolonged strict prohibition of movement of people under present economic circumstances may no longer be appropriate,” said Punongbayan. “Especially so if it is done with the view of waiting for the arrival of a vaccine, not only because of the uncertain time of its arrival, but also of the long time needed to produce it and inoculate the right proportion of more than 100 million Filipinos.” The chairman and CEO of Pfizer, Albert Bourla, even issued a statement specifically to lay down a realistic timeline and dampen expectations of quick arrival of a vaccine.
In this connection, when considering succeeding alternative courses of action, Punongbayan added, the country may need to learn from the experience of our neighbors, particularly that of Vietnam.
This Southeast Asian country, which has been reporting a much lower number of COVID-19 infections than the Philippines, is expected to grow its economy in 2020 by 1.6%, a spectacular performance in the midst of practically declines all over the world. With such performance, the IMF expects that Vietnam could even overtake the Philippines in per capita GDP this year.
“While such an occurrence has long been expected in view of the continuing historical decline in the economic position of the Philippines among ASEAN countries, it still gives a feeling of sadness when we see it actually happens,” Punongbayan said.
“We have to do our best to minimize our losses, both in terms of lives and the economy during this contagion,” the Buklod founder said. Doing so needs a flexible containment policy and efficient surveillance, both employed with deliberateness to produce the needed optimum balance, he added.