In a June 2020 Outlook Report by Moody’s Investor Service titled, “Global economy is limping back to life, but the recovery will be long and bumpy,” the firm noted that the second quarter of 2020 would “go down in history as the worst quarter for the global economy since at least World War II.” But, on the bright side, Moody’s also said it was expecting “a gradual recovery beginning in the second half of the year.”
However, this recovery will depend on a number of factors: whether governments can reopen their economies while also safeguarding public health; and, a “rebound in demand,” which “will determine the ability of businesses and labor markets to recover from the shock.” It also said that the “effects of lockdowns on Q2 activity will be larger than previously thought.”
Moody’s also noted that the “coronavirus crisis has amplified existing tensions between the US and China on trade and technology: The deterioration in the relationship makes both the economic and geopolitical environment highly uncertain for businesses in China and the US, as well as for other countries, in our view.”
These concerns, I believe, sum up what we can expect in the coming quarters. It is bad enough that we are grappling with domestic issues. But couple this with external trade and finance implications, resulting from global economic and geopolitical uncertainties, then the world economy will surely be in the doldrums in the coming months if not years.
It is thus unsurprising that four in 10 Filipinos are already expecting their quality of life to worsen in the next 12 months amid the coronavirus disease 2019 (COVID-19) pandemic. This was according to a recent Social Weather Stations (SWS) survey, as reported by the Philippine Star. Only two in 10 were expecting their lives to improve, while another two in 10 believed their quality of life would “stay the same.”
“The 43% proportion of pessimists in May is the new peak in the 37-year history of 135 SWS surveys, breaking the previous record 34% in March 2005,” SWS said. “The May 2020 net optimism score of -18 (optimists minus pessimists) is the worst in survey history, breaking the previous record –13 in October 2000 and March 2005.”
In reaction, Malacañang noted that the survey was conducted while the country was in “lockdown,” and that the results were understandable given the economic shutdown not just in the Philippines but also in other parts of the world. I will have to agree with the Palace on this, considering that in March to May, the community quarantine resulted in economic dislocation and widespread anxiety.
At this point, count me among the 43% of pessimists, having suffered a personal economic downturn as a result of the pandemic and the lockdown. And while easing of quarantine restrictions started this June, things have not actually looked up for freelancers or consultants and “professionals in general” like myself. And they are likely to stay this way for the rest of 2020 and maybe 2021.
And this makes me doubly interested in follow-up surveys, particularly for the 3rd quarter, to check whether confidence is improving, even if just slightly. Easing of restrictions has just started, particularly in Metro Manila, and what Moody’s describes as a “long and bumpy” road to economic recovery has barely begun. It will take a lot of time, and stimulus, for the Philippine economy to gain enough momentum to start sustaining growth once more.
I recall that sometime in May, the Philippine Star reported on a survey by PwC Philippines indicating that less than 20% of startups in the country would have enough cash to sustain their business operations for more than a year amid the impact of COVID-19. This was based on PwC-hosted discussions in April, during lockdown, with 90 startup founders in the country.
Also, in May, BusinessWorld reported that a survey in April by the Employers Confederation of the Philippines (ECoP) showed that 67% of respondent-companies chose to postpone expansion or investment decisions because of COVID-19. The respondents were 148 large companies and 115 micro enterprises. At this point, at least some of those companies have probably chosen to actually cancel, rather than just postpone, expansion and new investments.
Of the respondents, 34% also considered their companies poorly prepared to deal with the impact of COVID-19, while 28% said they did not have a written business continuity plan. Also, 64% have stopped hiring, while 9% said they laid off anywhere from 25% to 50% of their employees. For those who have kept their workers meantime, job cuts could be expected in the future if the pandemic continues for another six months (from April).
Well, by next week we already start July, and thus the 3rd quarter, and it doesn’t seem like COVID-19 is about to disappear. Cases are still on the rise, not only in the Philippines but in many parts of the world as well. And we are all far from recovering from the negative economic repercussions of the pandemic and various degrees of lockdown here and abroad.
I was in Glorietta just last Tuesday in search of consumer durables. A lot of work-from-home and study-from-home essentials like folding tables, electric fans, and computer laptops remain in short supply. Efforts to prepare for the school year, and prolonged WFH under continued community quarantine, are being hampered by stores’ depleted stock rooms.
More shops and restaurants, are open compared to March-May. Even supermarkets appear to have more supplies. But other than food, things that one could have easily bought off the shelf pre-COVID-19 are now harder to come by. Even the malls have become gloomy, empty. Many shops remain closed. Parking buildings are dark and empty.
A trip to the mall, to the shops, used to be a delight, a welcome break from the hustle and bustle of work. But it has now become dreadful, at least for me. It is now inconvenient, and a source of anxiety. It is also a dark reminder that not all is well with the world for who knows until when. Soon, maybe more than four in 10 Filipinos will start to expect their quality of life to also worsen in the next 12 months.
Marvin Tort is a former managing editor of BusinessWorld, and a former chairman of the Philippines Press Council
