"The toll on our economy after 50 days of lockdown has been tremendous and harrowing."
"The toll on our economy after 50 days of lockdown has been tremendous and harrowing."
The economy slumped in the first quarter of 2020. Production of goods and services, what we call Gross Domestic Product or GDP during January-March this year, declined by 0.2 percent, in real terms, or minus the effect of inflation.
This is the first and steepest drop in production since 1998, ending 84 quarters or 21 years of frenetic growth, the longest economic expansion in the country’s history.
The economic collapse is likely to extend into the second and third quarters of 2020. Thus, we have the grim prospect of having the Greatest Recession ever.
The only way to stop that economic Armageddon is to revive the economy, dead for the last 50 days. Revival means lifting the so-called Enhanced Community Quarantine (ECQ) or even the GCQ on Luzon and key cities in the Visayas and Mindanao. These areas account for more than 75 percent of economic production.
The lockdown has meant economic loss of P2 trillion so far and unprecedented hunger, malnutrition, poverty, joblessness (easily 25 million have no jobs, a third which will not be restored), restiveness, and outrage. It has made the government bankrupt by this time. Government deficit as a percentage of GDP will hit 8 percent –the highest in our country’s history.
This year, Filipinos were going to join the upper middle class, with per capita income nearing $4,000. Instead, easily half of Filipinos will cross the poverty line downward. The rich become poor, and the poor become poorer. We will have the most number of poor in Southeast Asia.
The 1998 recession was triggered by the combined effects of the El Niño and Asian Financial Crisis.
This quarter’s end to unprecedented robust growth was triggered by the novel coronavirus (SARS-Cov-2) which causes the disease called COVID-19 –- coronavirus infectious disease 2019.
Reporting on the unusually bad economic news yesterday (May 7), Acting Economic Planning Secretary Karl Kendrick Chua cited what he called three “significant socio-economic risks and shocks during the first quarter of 2020, all totally unexpected: the Taal volcano eruption in January; a significant decline in tourism and trade starting in February due to the COVID-19 pandemic; and the need to implement the enhanced community quarantine (ECQ) in Luzon and other parts of the country starting March.”
Assuming positive growth averaged 5.5 percent in January, February and the first two weeks of March, economic production must have declined by 5.7 percent in the last two weeks of March to bring net negative growth to 0.2 percent for the whole first three months of 2020 (5.5 minus 5.7).
Since March 2020 inflation was 2.5 percent in the first quarter, the nominal drop in economic production in the second half of March alone was probably 8.2 percent (5.7 plus 2.5). That would be the worst decline since the drop of 7.4 percent during the political crisis of 1984 triggered by the assassination of opposition leader Benigno Aquino Jr.. In 1984, credit stopped, production stopped, the economy slumped.
The Philippines’ 2020 economic crisis is easily ten times the 1984 crisis. This year’s crisis is not just local, not just regional but global. The United States will have huge negative growth rate (-4.8 percent first quarter 2020), as will entire Europe (-3.8), China (-6.8), Japan (-7.1) and possibly every country on earth.
The toll on our economy after 50 days of lockdown has been tremendous and harrowing. Two-thirds of businesses shut down, according to NEDA data. Nearly half of non-government and the self-employed were suddenly unemployed.
All for what? Just to save at most 500 Filipino lives through ECQ. In the long term, because today’s hunger, malnutrition, poverty and joblessness, more lives will be lost due to diseases occasioned by such mass misery.
The ECQ was like looking for a couple of cockroaches. The whole building was evacuated and burned to the ground. And still, it did not find the cockroaches.
Admits Secretary Chua: “Containing the spread of the virus and saving hundreds of thousands of lives through the imposition of the ECQ has come at great cost to the Philippine economy. Our economic growth is showing weaker performance compared to the past two decades. Even so, our priorities are clear: to protect lives and health of our people.”
Chua has two solutions: ramp up agricultural production and go digital. We grow food. That is agriculture. We process the food. That is manufacturing. We deliver the processed food to consumers. That is logistics and services. Food is half of the consumer basket.
The NEDA chief’s other solution is go digital. Everybody will have an ID, a bar code or a QR code. That is easier said than done. Why? The government itself is not digitalized. Why? Well, it has something to do with graft. Graft from human contact. Obviously, you cannot collect money from a computer, a bar code or a QR code. But a human being can be very susceptible to suggestion by a bureaucrat.
Relief could be coming though. Even government itself seems tired of having the ECQ, mainly because it is rapidly running out cash to dole out to some 25 million families rendered poor by the coronavirus.
The only way to generate money is to borrow (about P1.45 billion has been raised, but that will be good for only a month) and to collect and or raise taxes. But how can you collect taxes from a dead business? You cannot tax something you don’t earn or have. It is like squeezing blood from turnips.
Let’s lift ECQ. It has not been worth it.
