Signs And Wonders


Delta is the fourth letter of the Greek alphabet. In general, it stands for change. In chemistry, delta is the change in energy levels. In business, it compares the change in the price of an asset. Its uppercase “D” denotes discrete change from one point to the other. Its lowercase “d” measures infinitesimal change which is the subject of much of calculus.

True to its name, the Delta variant of SARS-CoV-2 virus strain, B.1.617.2, is quickly changing the face of the world. It is superspreading. It was first detected in India in December 2020 and from there, it surged rapidly to Europe particularly the UK. In the US, the first Delta case was spotted in March 2021 and is now its dominant strain.

The Philippines has its own share of the latest variant of the COVID virus. It was not spared of this health scourge. This is the reason behind OCTA Research fellow Dr. Guido David’s advice to the Inter-Agency Task Force for the Management of Emerging Infectious Diseases (IATF) to prepare for it given the possibility of another infection surge due to its high contagiousness.

This is doubly urgent because for one, our current health protocols allow youngsters to go out of their homes. Based on the UK experience, unvaccinated and young people are highly vulnerable. For another, Filipinos who are younger than 18 years old are not given the jabs. They could be the potential victims. Health Undersecretary Maria Rosario Vergeire was actually behind the news when she said “It’s just a matter of time before it enters.” With actual local cases reported in Metro Manila, Central Luzon, Western Visayas, and Northern Mindanao, the Delta variant is now very much with us. We might have another perfect health storm waiting to happen.

Yale Medicine last week clarified that people who are completely vaccinated against COVID-19 would seem to be protected against the Delta variant. Those without the jabs and not observing the usual health protocols are at risk of being infected.

By this time, Filipinos who are deeply engaged in social media must have a good familiarity with the dynamics of the Delta variant. The Delta variant is “the fastest and fittest,” spreading 50% faster than the Alpha strain, which is itself 50% more transmissible than the original strain of SARS-CoV-2. Its math tells us its velocity is exponential. Yale Medicine says: “Delta is outcompeting everything else and becoming the dominant strain.”

Medical experts warn that if Delta truly moves fast enough as it does, we could have “hyperlocal outbreaks.”

It was good for the Metro Manila mayors to have announced “they would implement strict COVID-19 health and safety measures on the assumption that the more infectious Delta coronavirus variant was already spreading in the National Capital Region (NCR),” based on the Department of Health’s (DoH) report. While they would work for a granular lockdown, we find it difficult to imagine how the National Capital Region (NCR) can do it without a strong pandemic monitoring system. Until today, QR systems vary across the different areas in the NCR and even within each city, not all the establishments are exactly in synch. Granular lockdown means each local government unit (LGU) can precisely target specific barangay, purok, or even building. By faith, let us hope LGUs can go micro.

This cloud of uncertainty over our ability to manage current and future pandemics, courtesy of the Delta variant, explains the recent decision of credit rating agency Fitch to downgrade our country’s credit outlook from stable to negative. Fitch also downgraded the outlook of two government banks, as well as of four commercial banks from stable to negative while keeping their credit ratings due to the perceived weak prospect of the macroeconomy. In turn, this would have a negative impact on their asset quality and financial performance.

Just yesterday, we heard the report that Moody’s Investors Service also slashed its 2021 growth forecast from 7% to 5.8% due to the “acute challenge” of the pandemic.

Therefore, it is not difficult to understand why the Asian Development Bank (ADB) also sounded the alarm against the Delta variant in its supplement to the Asian Development Outlook. The ADB realizes that the new variant poses risks to the Philippine economy’s recovery even as it maintained its growth projections at 4.5% and 5.5% for 2021 and 2022, respectively. We believe those growth forecasts are already way below the official targets of 6-7% for 2021 and 7-9% for 2022, and could accommodate a less than ideal outcome.

The ADB expects the Philippines to sustain its public spending on infrastructure projects and social support to encourage consumption expenditure. The ADB is pleased with the initial improvements in key macroeconomic indicators, gradual easing of quarantine restrictions and continued rollout of the vaccines. It also expects further improvement in business and consumer confidence. The government is now challenged to inoculate around 70 million Filipinos or 70% of the population by yearend. This could be the wild card because so far, DoH has reported that only 4% have been fully vaccinated at the rate of less than 300,000 per day.

The ADB is quite firm on one point. The Delta factor cannot be ignored. Its second revision of the country’s growth prospect is decidedly low enough to also reflect the risk from a Delta upsurge.

We believe the Development Budget Coordination Committee’s (DBCC) consensus to uphold its current growth targets despite this biggest health threat to business activities and market confidence is of a Braveheart effect. We see a Braveheart effect when we choose to be more generous, for instance, with our assessment despite all the odds against a quick economic bounce back, lest we discourage domestic demand and keep the recovery more elusive.

Nobody can challenge the DBCC’s push for “gradual and safe” reopening of the economy, more widespread rollout of the vaccines and expansion of health capacity. These could ward off the potential impact of the Delta factor. Infrastructure must be pursued. This could make growth possible and sustainable. These propositions are critical.

But in effect, the DBCC decision is premised on the success of pandemic mitigation to permit economic and business reopening. Confidence has been reposed on green shoots in job creation, trade, and manufacturing, as well as on personal mobility. Together, they comprise the high scenario.

Two factors could frustrate our optimistic expectation, though. One, our pandemic mitigation has been historically weak and no tipping point has been reached to convince us that this time, our health protocols and inoculation records could change the outcome. We could only hope that the DoH’s four-door strategy at points of origin, entry, care, and epidemic surge would be implemented with great dispatch to produce better results.

And, two, for the next four years, the DBCC decided to maintain its revenue projections despite the budgetary implications of a possible Delta variant on health, education, wage subsidy, and business assistance. We could only hope that the substantial tax relief granted under the CREATE Law to corporates would translate into higher reinvestment and more jobs for our people.

Preparing a low scenario for deciding on public policy is indispensable. Being conservative reflects the usual uncertainty in dealing with the deadly Delta factor. Our past experience in ramping up public spending teaches us we have limited absorptive capacity. Most important, a conservative scenario will challenge Congress and the Palace to deliver decisive and enlightened leadership, and the civil society to demand it.

It is always better to be prepared, to have a foretaste of the potential cost of muddling through another round of health crisis and economic freeze.

As Rolf Dobelli (The Art of Thinking Clearly, 2013) reminds us: “As paradoxical as it sounds, the best way to shield yourself from nasty surprises is to anticipate them.” That is the essence of the Delta factor, that is the essence of a meaningful change.


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.