The Duterte administration is to blame for the worst economic collapse in the country’s recorded history. Growth rate falling to -16.5% in the second quarter from 5.4% in the same period last year is an unprecedented 21.9 percentage point drop.
All the countries in Southeast Asia recorded their first cases of COVID-19 within weeks of each other around the end of January. Six months later, the Duterte government’s incompetent response has made us not just the sickest country but also the weakest economy in the region.
The country’s second quarter performance is the worst of the major economies of ASEAN: Singapore (-12.6%), Indonesia (-5.3%), Vietnam (0.4%). Thailand and Malaysia haven’t released their official estimates yet but these are projected to be around -10% to -13% by analysts.
The pandemic’s impact is much worse than it should be because of the Duterte administration’s slow, poor and inadequate pandemic response. The economy will falter as the virus continues to spread. This is aggravated by the Philippines having the smallest COVID-19 response in the region to date, as monitored by the International Monetary Fund (IMF).
The indifferent response of the economic managers to the recently released data showing the deepest recession in the country’s history is going to make things worse. The government refuses to give any more financial assistance to poor households. Instead they keep on harping about creditworthiness and their ever more irrelevant Build, Build, Build infrastructure offensive. The economic managers repeated today that they have a recovery plan but have yet to share this publicly.
As it is, the economic managers are only willing to support a Php140 billion Bayanihan 2 package which is barely 0.7% of the gross domestic product (GDP). Knowing how stingy this amount is, they even deceitfully bloat this by claiming Php40 billion in corporate tax breaks under the proposed Tax Reform for Acceleration and Inclusion (TRAIN) 2 aka Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act as a stimulus measure.
Tens of millions of poor Filipinos are suffering and will keep on suffering from the administration’s criminal neglect. IBON estimates 14 million unemployed Filipinos in April 2020, including discouraged workers who did not bother looking for work. Adding the underemployed or those with jobs but not at work could bring the number of Filipinos that are jobless and with lower incomes to as much as 27 million.
The Department of Labor and Employment (DOLE) already recently reported 554,966 overseas Filipino workers seeking assistance. This will increase as the global recession unfolds further. The DOLE also continues to report closures and retrenchments even after the easing of lockdowns in June over two months ago. As it is, over three million workers in 107,152 companies have already been affected by flexible work arrangements, possibly lower pay and closures.
At the rate we’re going and with such a tepid government response, it may take the economy two years or more to even just get back to where it was before the pandemic. That was not even a good place to begin with.
The way out from recession is straightforward: contain the virus with rational testing, tracing and isolation of cases instead of desperate lockdowns; support health frontliners and increase hospital capacity; give financial assistance to improve household welfare and boost aggregate demand; and support Filipino MSMEs with cheap credit and enterprise support. IBON initially estimates a Php1.5 trillion recovery and reform package worth 7.7% of GDP is needed.