Bangko Sentral ng Pilipinas (BSP) Gov. Benjamin Diokno warned last week that the new lockdown posed a serious threat to economic recovery.

Also the concurrent head of the Monetary Board (MB, the country’s highest policy-making body on banking matters), Diokno said they had observed that “the reimposition of quarantine measures to arrest the recent wave of COVID-19 infections could pose a risk to the ongoing economic recovery.”

“To this end,” he added, “targeted fiscal and health interventions, especially the acceleration of the government’s vaccination program, will be crucial in safeguarding public health and preventing deeper negative effects on the Philippine economy.”

For the private banking sector, lending continued to decline for the seventh consecutive month last June.

The country managed to exit recession in the second quarter of 2021 after Gross Domestic Product (GDP) grew by 11.8 percent. As a result, first semester GDP growth was pegged at 3.7 percent, which is still below the six to seven percent GDP government target for the year.

Recovery momentum was affected, however, after second quarter GDP slid by a seasonally-adjusted 1.3 percent quarter-on-quarter basis, following a 0.7 percent growth in the first quarter.

Unconfirmed reports that the new 15-day lockdown, which was already extended by one week to last until the end of this month, would be extended further had the business community expressing deep concern that the economy was already in the direst of straits.

One of the mayors of Metro Manila was reported as the source of the report but this was quickly denied.

The Philippine Chamber of Commerce and Industry – the country’s largest business organization – warned last week that an extension to the current lockdown could only worsen the country’s health and economic crisis.

Acting PCCI President Edgardo Lacson said the pandemic was “a pharmaceutical problem while lockdown is a militaristic solution.”

Said Lacson: “Our economy is disfigured after many protracted lockdowns, yet the spread of COVID continues.”

An extension of the lockdown cannot be discounted, however, given the dramatic rise in the number of COVID-19 cases, which recorded 14,749 cases on August 14.

The highest number of COVID-19 cases ever recorded in the country was 15,310 on April 2, last year.

The Department of Health and the OCTA Research think tank predicted the number of cases to rise to 11,000 and 10,000/day respectively by the end of the month.

A worst-case scenario of up to 30,000 cases a day by September has become a possibility, which means that an extension to the lockdown is likely.

Trade Sec. Ramon Lopez confirmed that an extended five-week quarantine had been discussed by the Inter-Agency Task Force for the Management of Emerging Infectious Diseases, but nothing had been decided.

Various scenarios were presented, according to Lopez, “but that doesn’t mean there’s a lockdown.”

“Economic and security angles are always considered together with health,” he added.

The current lockdown began on August 6 and was to last until August 20, but the government said it was likely to be extended until the end of the month.

The five-week extended community quarantine for Metro Manila is the worst-case scenario for the Health Department.

To this, Lacson said, “Another five-week lockdown could be the proverbial last straw on the camel’s back.”

That extended lockdown would wipe out the economic gains earned in between the previous lockdowns, all of which were temporary, he said.

Following the latest economic developments, the BSP last week revised the country’s inflation outlook for 2021 to 4.1 percent from four percent. The latest estimate exceeds the BSP’s two to four percent target range for the year.