Covid-19 reverses Philippines' decade of economic gains
(Baonghean.vn) - The Philippines' growth model is built around the ability of its people to move around easily and freely. That is what makes the country vulnerable during the pandemic.
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| Police check motorcyclists at a checkpoint in Marikina City, Philippines on August 6. Photo: AP |
Pandemic ends growth streak
According to an article on Channel News Asia by Professor Ronald U Mendoza, currently dean of the Anteneo School of Government, Ateneo de Manila University, in 2019, the Philippines was one of the fastest growing economies in the world. At that time, it had finally shaken off the unflattering title of “sick man of Asia” that it had been given during the economic collapse at the end of the Ferdinand Marcos regime in the mid-1980s. After decades of painstaking reforms while paying off debts incurred under the old regime, the country’s economic renaissance began in the decade before the pandemic.
According to the Philippine Statistics Authority’s 2018 GDP growth rate data, the country recorded an average annual growth rate of over 6% between 2010 and 2019. The economy was hailed as one of Asia’s new tigers. But that was before Covid-19.
The pandemic has made people realize that a growth model based on services and remittances cannot work well in the context of a global outbreak.
The Philippines' economic growth slowed in 2020, its first negative growth since 1999, and the country suffered one of the deepest recessions among members of the Association of Southeast Asian Nations (ASEAN) last year.
And while the government forecasts a slight recovery in 2021, some analysts are now expressing concern about an uncertain and fragile recovery, fueled by the country's prolonged lockdown and inability to transition to a more effective containment strategy.
Instead, the Philippines has relied on extremely strict travel restrictions across large swaths of the country's major cities and growth hubs whenever Covid-19 outbreaks threaten to overwhelm its health system.
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| People are screened before receiving Covid-19 vaccination at a vaccination site at a school in Manila, Philippines on August 10. Photo: Reuters |
What is the problem?
How, then, did one of Asia’s fastest-growing economies come to a halt? Blaming the pandemic entirely for this may be too simplistic. First of all, it could be argued that the Philippine economic model itself seems more vulnerable to the outbreak. It is built on the ease and freedom of movement of people, but growth based on tourism, services and remittances is vulnerable to lockdowns and a decline in consumer confidence.
A sharp decline in international travel, a halt in tourism, and domestic lockdowns and restrictions on movement have crippled the retail, restaurant and hospitality sectors. Fortunately, the country’s business process outsourcing (BPO) sector is showing some resilience – but key markets have been hit hard by the pandemic, forcing the sector to quickly reskill and adapt to the opportunities that arise in the new normal.
Second, the Philippines’ response to the pandemic is also questionable. Lockdowns are reasonable and useful when a country needs time to strengthen its health care and testing-tracing-treatment systems. These are the foundations that need to be built to contain the outbreak more effectively.
However, without strengthening and consolidating these systems, a country is wasting its time by imposing a lockdown. This seems to be the case with the Philippines, which has made headlines globally for implementing one of the world’s longest lockdowns, but has failed to flatten the Covid-19 curve.
The Philippines is now preparing for another hard lockdown and is still trying to come up with a more effective containment strategy amid concerns about the Delta variant, which has been spreading rapidly across Southeast Asia. Some say the country appears to be stuck in a cycle of lockdowns that are taking a heavy toll on the economy and could create negative expectations about future Covid-19 outbreaks.
If Delta and other possible variants are viewed as a short-term threat, then ineffective containment of the outbreak will likely force the country to return to the “lifeline” of strict travel restrictions.
Meanwhile, the central government of the Philippines has only provided two months of social assistance in the 16 months of lockdown through mid-2021. All this puts further strain on a population already reeling from a deep recession, job losses, and long-term risks to human development. Low social assistance amid rising unemployment and hunger is also likely to reduce compliance with stay-at-home policies.
Third, the Philippines has been lagging in its vaccination campaign, initially due to supply and rollout issues and then hit by vaccine hesitancy, which is likely to further delay the country’s recovery.
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| Controlling vehicles passing through the Covid-19 prevention checkpoint in Quezon City, Philippines on August 2. Photo: Reuters |
Lessons learned
For the Philippines, there are clear lessons to be learned from its experience as well as from international best practices. To achieve a more successful economic recovery, analysts say the Philippines needs to address key policy issues. First, the country needs to develop a more effective containment strategy, especially in the face of the possible threat from new variants, primarily through strengthening its testing, tracing, and treatment systems.
Drawing on lessons from other countries, these systems typically include comprehensive, mass testing strategies to better inform the public and private sectors about the true status of cases in the community. In addition, integrated movement databases support more effective and timely tracing. This type of detailed and timely data allows governments and the private sector to better coordinate containment strategies in areas and communities that need help due to the risk of outbreaks. Unlike a blanket lockdown, this targeted, data-driven strategy can allow other sectors of the economy to remain more resilient than would otherwise be the case.
Second, the Philippine government needs to increase the adequacy and transparency of its direct social protection operations to provide immediate assistance to poor and low-income households, which have been severely affected by the substandard response to the pandemic. Experts say this requires rebalancing the budget to focus more on education, health, and social protection, rather than focusing too much on infrastructure projects. This is also an opportunity to promote the social protection system to create a safety net that covers not only the poor but also low- and lower-middle-income earners. The main concern here will be to introduce social protection innovations that will prevent middle-income Filipinos from sliding into poverty during the pandemic or other crisis.
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| Philippine Health Minister Francisco Duque at a press conference in Manila in February 2021. Photo: Reuters |
Third, the Philippines needs to accelerate vaccination to cover at least 70% of the population as soon as possible, and enlist more support from various stakeholders to improve the vaccination campaign. An effective communication campaign to change vaccine hesitancy, based on trusted institutions, is needed to better protect the population from the threat of Delta and other variants that are currently affecting the Philippines. It would also be helpful if the government could prevent politically motivated vaccine scares, as happened with the dengue vaccine.
Fourth, the Philippine government should create a more effective reconstruction strategy linked to universal and comprehensive health care…
As much of the ASEAN region reels from the spread of the Delta variant, the Philippines needs to take these steps to help ease concerns about its preparedness for new variants emerging in the country, while adjusting expectations for economic recovery. Only then can it avoid becoming the “sick man of Asia” again, and return to the rapid, steady growth of the pre-pandemic decade.