By Corina Oliquino
London-based macro-economy research firm Capital Economics in a recent brief said economic recovery in the Philippines from the coronavirus pandemic will likely be among the slowest in Asia.
Capital said this is due to prolonged lockdowns, now at 100 days and the continued rise in the number of infections.
As of June 22, the country logged 630 new infections, eight deaths and 250 recoveries.
The firm, through the use of high-frequency data such as mobility data from Google, Apple and daily figures on tourism arrivals and electricity usage suggest that economic activity in most countries appeared to have already bottomed out in April and is now set for recovery, with China, Taiwan and Vietnam the fastest but will be slowest in the Philippines, Indonesia and India.
Capital Economics said people living in areas still reporting infections will likely practice social distancing longer, resulting in gradual economic recovery.
“At the other end of the spectrum are countries in South Asia as well as Indonesia and the Philippines which appear to have given up on trying to eliminate the virus. While lockdowns in these countries are being eased, they are only being lifted gradually and the high-frequency data suggest the recovery in activity is proving a lot slower in these places,” the report said, noting high-frequency data from Google and Apple, along with the manufacturing Purchasing Managers Index (PMI), conditions in the Philippines and in Singapore “unsurprisingly remain depressed.”
Last May, the country’s PMI was at 40.1, a softer decline compared to the 31.6 recorded in April.
The firm also noted that the speed of the rebound will depend on the size of the policy response.
“In these fast-moving circumstances, they aren’t a very useful guide for policymakers and markets,” Capital Economics said.
“In response to the slump in activity and collapse in inflation, central banks have been cutting interest rates aggressively. The biggest cuts have been in Pakistan and Vietnam. Malaysia, Sri Lanka, India and the Philippines have also cut rates by at least 100 bps (basis points) since the start of the year. We expect further rate cuts in these countries,” it added, noting COVID-19 will also cause a surge in the government’s debt.
“The crisis will lead to a sharp increase in government debt. For most countries this will not be a problem. However, there are a few places, namely the Philippines, Thailand, Vietnam and Malaysia, where the crisis is likely to push national debt above 60 percent of GDP (gross domestic product) by the end of the year. A period of austerity will be needed after the crisis is over to bring government debt down to more comfortable levels, dragging on the recoveries,” it said.
Previously, Capital Economics downgraded its 2020 GDP outlook for the Philippines to -6 percent from the previous -4 percent.
“Countries that are struggling to contain the virus (large parts of South Asia) and where the size of the stimulus has been small (Indonesia and India) are likely to experience much slower recoveries. Thailand’s dependence on tourism will also hold back its recovery,” it said.
₱2.2 trillion in losses from COVID-19
In a report by Inquirer Business, the National Economic and Development Authority (NEDA) and the Department of Finance (DoF) have projected the COVID-19 crisis will cost the Philippine economy ₱2.2 trillion in losses this year as millions of workers lose their jobs and income.
NEDA Sec. Karl Chua says the country needs a ₱848 billion stimulus to ease the economic pain, noting only ₱173 billion or 0.9 percent of GDP will need to be shelled out to revive the economy through a fiscal stimulus program embedded in the proposed Philippine Program for Recovery with Equity and Solidarity (PH-Progreso) being pitched by the economic team to Congress.