THE Philippines’ path to economic recovery faces headwinds, as coronavirus disease 2019 (COVID-19) cases continue to rise and policy measures rolled out by the government are still “meager.”
In a report published Wednesday, Oxford Economics measured the recovery paths of 12 economies across Asia Pacific based on the following criteria: health and economic vulnerability, stringency of lockdowns, success in containing the virus, and macro policy support.
The Philippines recorded the second-lowest score after India.
Vietnam, on the other hand, had the brightest recovery prospects in the region.
“At the bottom are India, Philippines, and Indonesia. All three are clearly still struggling to get past the peak of the pandemic, which is a major headwind to their outlooks,” the report read.
As of June 18, the Health department reported the total number of COVID-19 cases in the Philippines stood at 27,799, with 1,116 deaths and 7,090 recoveries.
“At the same time, the fiscal policy response has been quite meager in both India and Philippines, especially compared to the stringency of lockdowns they had imposed — which at one point were not only among the most severe in Asia but also globally,” it added.
The government placed Luzon under an enhanced community quarantine in mid-March, halting almost all economic activity. Lockdown restrictions have started easing around the country in May, with Metro Manila now under a general community quarantine.
According to the Asian Development Bank’s COVID-19 Policy Database, the Philippine government’s pandemic response package is the sixth-largest in Southeast Asia and fifth-smallest relative to population. The Philippine package was $20.078 billion as of June 1, equivalent to 5.46% of gross domestic product (GDP) and $188.26 per capita.
Based on its scorecard, Oxford Economics said Vietnam, South Korea, Taiwan, Japan, China and Hong Kong had high scores which indicate stronger prospects for recovery.
“Vietnam and South Korea have the added advantage of achieving high containment scores without a very stringent lockdown for a prolonged period. This also partly explains why their economies require less fiscal support to contend with the outbreak and its aftermath,” it said.
Singapore, Malaysia and Thailand’s scores placed them in the middle of the pack. Singapore’s recovery is hobbled by the prolonged lockdown and rising cases, despite a massive fiscal response.
Meanwhile, Capital Economics said there are indications all countries in the Asia-Pacific region are now “rebounding” although the pace varies.
“The recovery is most advanced in China, Taiwan and Vietnam. The Philippines, Indonesia and India are doing the worst,” it said, citing high-frequency data based on mobility from Google and Apple, daily tourist arrivals and electricity usage.
With the easing of lockdown measures in the region, Capital Economics said “activity has now bottomed out,” although the pace of recovery appears uneven.
“In Vietnam and Taiwan, which appear to have eliminated the virus, the Recovery Trackers are not far off pre-crisis levels… In contrast, in the Philippines, Indonesia and India, where restrictions on movement and commerce are still in place and case numbers are showing little sign of coming under control, our Recovery Trackers are still at least 40% below normal levels,” it added.
Capital Economics said recovery is expected to be slow, with rising unemployment, impaired balance sheets, and weak global demand.
At the same time, the Institute of International Finance (IIF) on Thursday slashed its economic output forecast for ASEAN-4 region to -3.2%. ASEAN-4 is comprised of the Philippines, Indonesia, Malaysia and Thailand.
“Widespread lockdowns and travel bans will have a substantial impact on the tourism industry as well as domestic demand, while weakening activity in major trading partners will be a drag on exports. Forecast downgrades are largest for Thailand and the Philippines, where Q1 data already show substantial weakness, and Malaysia, where a longer-than-expected lockdown will be challenging for the economy,” IIF said in its latest Macro Notes “ASEAN-4: Worst recession since the Asia crisis.”
The region’s fiscal response is bigger than most emerging markets, IIF said it is uneven with Indonesia’s at 4.6% of GDP to Thailand’s at 11%.
“On the monetary side, we expect central banks to continue to inject liquidity via open market operations and bond purchases, while delivering further policy rate cuts. Overall, we expect the region to fare better than most other EMs (emerging markets), with the contraction most severe in 2020 Q2, and expect a healthy recovery in 2021,” it said.
The Philippine economic team projected GDP to contract by 2-3.4% this year before rebounding to 8-9% in 2021. — Beatrice M. Laforga