Towards the new normal

The journey to the new normal has many alternative routes. One of them is the attempt to achieve herd immunity against the pandemic. Seen as an alternative to a prolonged lockdown, the strategy involves exposing the majority of a community’s population to the pathogen. When the infected have recovered, herd immunity is said to be attained. Theoretically, this approach involves less economic dislocation. But it may entail greater human suffering as the disease is given more space. Suggested by some Princeton researchers, the herd immunity strategy is expected to work in India given its relatively young population. They will be allowed to return to work and to assume a “normal” life while continuing with social distancing, mandatory wearing of masks, and a ban on large gatherings.

According to Bloomberg, while the strategy was discarded by the UK, India is contemplating its use. This is because lockdowns and social distancing measures are not likely to produce positive results in a country where living conditions are cramped and crowded. Perhaps India is banking on the fact that its young people may be at a lesser risk of hospitalization and death. Of course, our initial experience with the lockdown is quite favorable.

But how would one in the Philippines feel being an intentional or even an accidental, guinea pig? Expected to achieve a 60% immunity rate in seven months, the herd immunity strategy appears to be sensible for the 60% who would make it. But what about the other 40%? What are the consequences and costs of getting as much as 82% of India’s huge population infected before herd immunity is established?

These are not just percentages or numbers, these are human lives — grandparents, parents, siblings and children.

As the pandemic rages on, the likelihood that India’s health care system will prove inadequate is quite high. It is not clear how much immunity will be imbibed by those exposed and compromised in what Bloomberg describes as a country with the “worst-in-the-world pollution” and “poor health conditions.” The global economy and national economies are also making painful and difficult transitions towards the new normal.

This month, the International Monetary Fund (IMF) admitted that the impending global recession could be the deepest for the best part of a century. Both the duration and the impact of a standstill conspire to make the recession defiant of usual business cycles that define the dynamics of real sector and financial market performance. This is totally a new game.

Up until now, the Philippines has enjoyed a record of 84 quarters of sustained positive economic growth. This consistent record was achieved through 30 years of strategic policy and structural reforms underlying the renewed confidence of both foreign and domestic investors. We have scored periodic upgrades to investment credit rating. These gains are now threatened by the pandemic. So our economic managers do acknowledge that at best, the Philippine economy would be stagnant.

Will the Duterte Administration’s four-pillar “We Will Rise as One” socioeconomic strategy against COVID-19 be able to arrest the pathogen and address its impact on economic recovery very quickly?

Pillars 1 and 2 are for containment purposes. The first pillar is for emergency support to vulnerable groups amounting to P590 billion. This should help avoid mass hunger and a maintain reasonable level of domestic consumption. Two items are also covered: small business support programs and increased local government assistance.

For Pillar 2, given that the health sector has suffered from long years of neglect, we hope the current allotment of P58.6 billion would suffice to ensure the safety of health officers and establish public hospitals with their own research and testing facilities in every province.

Pillar 3 consists of P843 billion in both fiscal and monetary actions. This component includes the peso equivalent of the Bangko Sentral’s previous easing of the policy rate and the drop in RRR which infused greater liquidity into the system.

Pillar 4 is focuses on promoting economic recovery, “bouncing back” after COVID-19. It judiciously recognizes that saving human lives, for now, takes precedence over our economic woes. While the economy and businesses are important, reviving them can wait. The plate is just too full.

What do we need to look at this year and the years ahead?

Data granularity on each sector most affected by the standstill would be very useful. Labor-intensive industries must be the hardest-hit. Small and medium businesses are among them. Housing and infrastructure construction companies will show some losses. Airline, tourist, hotel, and hospitality establishments are also suffering. Unlike in Switzerland where 45% of jobs including banking and consultancy services can be executed at home, quite a limited number of jobs in the Philippines may be accessed remotely.

The Philippine corporate profile shows the preponderance of small business, invariably scarred by the long shutdown. In a study by researchers from the University of Chicago, Harvard, and the University of Illinois, about a quarter of small businesses in the US do not have enough cash on hand to last a month. The same is true in the Philippines.

Fiscal stimulus may have limited impact in 2020. So far, the infra program has lost nearly two months. Absorptive capacity may be constrained to allow for completion of scheduled projects especially big-ticket items. Rather than granting new allocations and increasing borrowings from the capital markets or from the Bangko Sentral, it would be great to realign the budget from high-hanging infra fruits to the more immediate four-pillar strategy.

Moreover, while wage support is desirable to assist workers during the lockdown, employers themselves should partly shoulder the onus. Rehiring could be costly.

Big bailouts should also be avoided because not all business pains are created equal. Social media posts remind us, “we are all caught in the same storm, but we are in different boats.” Thus, instead of wholesale bailouts, access to loans can be further enhanced by the banks, especially with lowered policy rates and the several RRR reductions.

Finally, in the new normal, one can expect civil society to have a stronger voice and bolder opinions. The pathogen has infected people from all walks of life but the impact is very much differentiated across income groups. There is growing discontent in many barangays. Instead of the promised cash, many households have received bags with a few small cans of sardines, packets of instant noodles and some kilos of NFA rice.

In Brazil, they banged pots and pans from their windows. In Lebanon, the prisoners staged a riot in their penitentiary centers.

Social media is a channel awash with anger, frustration and near desperation. Comments and posts expressing hunger, bewilderment at selective rationing, and countless surveys run side by side with calls for stricter lockdown implementation, opposition to premature ECQ lifting and conflicting demands to permit public transportation and some business reopening. It is a cacophony of opinions, harmonized only by uncertainty.

Yet, It is hope that brings us to another day. Hope for a vaccine, as Israel scientists achieve great strides. Hope for a cure, even locally, as the Palace inquires into the effectivity of the Fabunan antiviral injections. Hope for a new normal that is more fair and equitable. We all hope for a new normal with a more respectful attitude to life. A trending quote by Dave Hollis could be a good guidepost: “In the rush to return to normal, use this time to consider which parts of normal are worth rushing back to.”

Diwa C. Guinigundo is the former Deputy Governor for the Monetary and Economics Sector, the Bangko Sentral ng Pilipinas (BSP). He served the BSP for 41 years. In 2001-2003, he was Alternate Executive Director at the International Monetary Fund in Washington, DC. He is the senior pastor of the Fullness of Christ International Ministries in Mandaluyong.