By Marissa Mae M. Ramos
ANNA CRUZ, a mother of two, has been struggling to feed her family since last week when Luzon was placed under enhanced community quarantine in order to contain the spread of the coronavirus disease 2019 (COVID-19) in the country.
“We may have money, but we have nowhere to buy,” she said in Filipino. “Groceries and wet markets have limited basic supplies in the province due to the lockdown.”
With Luzon in lockdown, work and transportation has been suspended, while local government units imposed curfews and checkpoints to discourage people from leaving their homes.
Economists have already trimmed Philippine growth forecasts this year amid the growing economic fallout from the pandemic. Even consumption — considered to be the backbone of the Philippine economy — is not spared.
“With strict curfews and limited mobility, the once potent Pilipino Purchasing Power is now sidelined and is in danger of falling into contraction in [the first half of 2020] should this persist,” ING Bank N.V.-Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.
Mr. Mapa has downgraded his gross domestic product (GDP) growth outlook for this year to 5.6% with a 5.3% expansion as the worst case scenario.
The Philippine economy has been characterized as consumption driven, with household spending having contributed 68% to the country’s GDP last year.
University of Asia and the Pacific (UA&P) Economist Victor A. Abola said consumption growth likely weakened in the first quarter and “possibly” in the second quarter.
“Assuming a peak [of COVID-19 cases] in May, household spending may recover, but probably reach only 4%-5% growth for the year,” he said.
The last time consumption spending grew by less than four percent was in 2010 when it expanded by 3.4%. That year, GDP grew by 7.6% with consumption contributing just 2.4 percentage points (ppts).
In comparison, the economy grew by 5.9% last year, with consumption chipping in 3.9 ppts as it expanded by 5.8%.
The National Economic and Development Authority (NEDA) on Tuesday said it now projects -0.6% to 4.3% economic expansion this year “without mitigating measures” against COVID-19 outbreak.
“Household consumption is expected to decelerate until June as consumer confidence dips due to health concerns and social distancing measures. In particular, a 5% to 10% decline in household consumption of non-essential commodities… could result in a loss of gross value added of P45 to P94 billion, equivalent to 0.2 to 0.5% of GDP and reduce employment by 16,500 to 62,500,” NEDA said in its assessment of the COVID-19 impact on the economy.
ING’s Mr. Mapa said the impact brought by COVID-19 has created a “big hole” in consumption and that the government should be able to step in “to fill in the huge gaps.”
“The government may also need to consider doing all it can to help productive members of society keep their jobs and to those who will not be able to keep them, to retrain and hire them eventually. Government will need to take a hard look at income replacement via cash transfers because no income means no consumption and authorities must do all it can to keep the wheels of the economy running,” he said.
The government has earlier announced a P27.1-billion relief package to aid affected sectors, with an additional $1-billion loan under negotiation.
“The injection of funds for the COVID-19 program, with all its costs, will create an injection of funds in the economy. This stands to create a multiplier effect that is positively good for investment,” Colegio de San Juan De Letran Graduate School Dean Emmanuel J. Lopez said in a separate e-mail.
Jose Ramon G. Albert, senior research fellow at the Philippine Institute for Development Studies (PIDS), also stressed the importance of introducing a stimulus package to keep the economy afloat.
“Stimulus is badly needed especially as about 40% of the labor market is in the informal sector, many of whom are reliant on day-to-day living,” Mr. Albert said.
For UA&P’s Mr. Abola, the private sector should “also has to do its share” in providing safety nets such as giving employees their 13th month pay in advance, providing full pay to minimum wage earners, and providing food and medical assistance to poor households in cooperation with LGUs or foundations.
Among sectors, economists pointed to retail of essential goods, health care, and communication services as those that would continue to see growth. On the other hand, sectors that produce “postponable” goods stand to lose amid the quarantine.
ING’s Mr. Mapa said it is difficult to estimate how consumption will fare for the rest of the year with the main priority to contain the outbreak.
“We’ve moved beyond a financial crisis, beyond an economic crisis and are in a full public health crisis. Economic aspirations will likely be set aside as we strive our best to save as many lives and to get out of this situation at the soonest…,” Mr. Mapa said.
A “big catch up on economic activities” may be seen in the second half, PIDS’ Mr. Albert added.