The economy is rebounding but real recovery is stalled by government’s major policy missteps, said research group IBON. These include over-reliance on indiscriminate quarantine measures, meager aid and stimulus, and snail-paced vaccine rollout.
The country’s gross domestic product (GDP) declined by -4.2% in the first quarter of 2021. This means that the economy has to grow at an impossible average of 10.8% growth in the last three quarters to hit 7% for 2021, IBON said, or the mid-point of the Development Budget Coordination Committee’s (DBCC) 6.5-7.5% projection for the year.
However, the group stressed that this is impossible especially because of three major policy missteps.
First, the economy remains unsafe with chronically poor containment measures and over-reliance on destructive community quarantines. Even the huge surge in cases since March has not been enough to spur the government to more rational action. It is still not spending for more widespread mass testing, better contact tracing, and more targeted quarantines. For instance, testing is still low at 50,000-60,000 tests daily since mid-March, and contact tracing is dismal at only four contacts traced per confirmed COVID-19 case (1:4). As a result, the economy is just waiting for the next lockdown, said IBON.
Second, the economic managers still refuse to give substantial emergency cash assistance (ayuda) and undertake real stimulus measures to spur rapid recovery. The meager Php1,000 aid per individual or maximum Php4,000 per family in ‘NCR plus’ is scanty compared to even the government’s official poverty threshold of just Php10,756 per month for a family of five. Small businesses and producers still clamor for substantial support. Distressed workers are also still awaiting a much-needed wage subsidy which economic managers have yet to find funds for.
IBON said that fiscal stimulus particularly to increase the purchasing power of distressed and hungry families is critical to boost aggregate demand. But the government merely bloats its COVID-19 response with ineffective monetary and liquidity measures.
Third, the vaccination program is painfully protracted and is very unlikely to reach the promised 70 million for herd immunity by the end of the year. The group said that this would require an unattainable 575,000 people vaccinated per day from now until the end of 2021, or almost six times the current pace achieved by the likes of Japan.
IBON said that the worst effects of COVID-19 have not been because of the disease but rather because of the Duterte administration’s willfully tepid response. Its long and harsh lockdowns have collapsed the economy unnecessarily and forced millions into poverty and hunger, yet have clearly still failed to control the spread of the coronavirus.
The government claims to be balancing health and economic concerns. The first quarter economic contraction, however, confirms that we are instead getting the worst of both worlds – economic losses and human suffering, said the group.
For the economy and the people to genuinely recover, said IBON, government needs to ramp up and ensure effective non-lockdown COVID containment, meaningful ayuda and stimulus, and speedy vaccination rollout.