The Philippines’ economy has been growing for the last two decades. Its last recorded contraction occurred in the fourth quarter of 1998, which was caused by an El Niño. A poll conducted by Reuters predicted a 3.1% growth in the country’s economy in the first quarter of 2020. This year however, the country grapples with crises, including the eruption of the Taal volcano in January, followed by the COVID-19 outbreak. Here is a look at the magnitude of the impact and the path to recovery.
Controlling the COVID-19 outbreak necessitated precautions, which were sometimes harsh. The government imposed travel restrictions at the end of January. The Philippine president declared a state of emergency in mid-march. Luzan Island, the mainland which contributes to 70% of the country’s economy, was placed on lockdown. President Rodrigo Duterte is well-known for his effectiveness in the fight against drugs. He enlisted the military once again to lead the country’s COVID-19 task force. Soldiers were deployed to enforce the Enhanced Community Quarantine (ECQ) measures. These included social distancing and restrictions on using public transport. Business journal Asian Review reported that these measures to fight the pandemic were among the strictest in Asia. In June the ECQ measures were relaxed. These gave way to General Community Quarantine (GCQ) measures. All of these restrictions had widespread economic impacts.
Impact on the Economy
The Philippines Statistics Authority reported that despite GCQ relaxations only 25% of the businesses in the country were able to resume operations. The purchasing managers’ index (PMI) is a measure of the prevailing direction of economic trends in manufacturing. PMI in the Philippines improved in July to 49.7, its highest level since January. A PMI of less than 50 reflects a decline in manufacturing activities. This indicates that the economy is still declining, although at a slower rate. According to World Bank analysts the recession is likely to exacerbate poverty and delay the country’s long term development plans. Meanwhile COVID-19 is far from gone.
Impact on Population
Individuals faced the effects of the recession as much as businesses. The Philippines’ central bank Bangko Sentral ng Pilipinas (BSP) reported that household consumption continued to decline in the first quarter of 2020. Travel bans hit the tourism industry, which contributes to 10% of the Philippines’ economy. The Philippines Statistics Agency reported that 7.3 million people lost their jobs in April. Nearly 79,000 overseas Filipino workers (OFWs) were repatriated. Another 400,000 are at risk of losing their jobs. For a country heavily reliant on remittances this is a huge impact.
With the mainland locked down, exports and imports have reduced. Public transport employees are out of jobs. Research institution Social Weather Stations (SWS) recorded that 43% Filipinos expect their lives to worsen within the next twelve months. Many have called for the president to ease the restrictions. However, the Philippine government’s view reflects that of governments across the world. President Duerte stated that, “We cannot afford to gamble.” He expressed concerns about the pandemic spreading to overwhelming proportions. A quick glance at the data proves that these concerns are very valid. After recording the first local transmission of COVID-19 in the Philippines in March, the numbers have increased. As of July 2020 there were 60,000 infected cases in the country. This is the second highest count of cases in Asia, exceeded only by Indonesia.
The Road to Recovery
The vast OFW community is doing their utmost to help improve the situation. According to a Senior Economist at the World Bank the OFWs are doing their best to send money online to support their families back home. Remittance service providers are helping by facilitating these transfers. Ria, an leading international money transfer company, is offering promotions for transfers to the Philippines. Ria will add $3 on the first transfer with a minimum value of $50. Also there is $0 fee on bank to bank transfers. The Philippine government has employed corrective measures of its own. The BSP has cut interest rates three times this year to stimulate economic recovery. Further easing of the lockdown measures will see a rise in productivity. BSP Governor Benjamin Diokno predicts that the Philippine economy will bounce back by the fourth quarter of 2020.
About the Author:
Hemant G is a contributing writer at Sparkwebs LLC, a Digital and Content Marketing Agency. When he’s not writing, he loves to travel, scuba dive, and watch documentaries.