COVID-19 impact study: Losses may hit P2.5 trillion; ease economic restrictions

MANILA, Philippines — The Philippine economy is projected to lose up to P2.5 trillion due to the coronavirus disease 2019 (COVID-19) pandemic,  thus requiring the “relaxation of economic restrictions while controlling the spread of the virus,” a state-run think tank study said.

The study, “Projected Disease Transmission, Health System Requirements, and Macroeconomic Impacts of the Coronavirus Disease 2019 (COVID-19) in the Philippines” by the The Philippine Institute for Development Studies (PIDS) revealed that the country may suffer economic losses between P 276.3 billion and P2.5 trillion.

“(P)rojections from combined disease transmission, micro-simulation and macroeconomic models suggest that the country’s gross value added may decline between PHP 123.5 billion to PHP 2.5 trillion,” the study said.

According to the study, manufacturing, which may lose P82.1 billion to P855.2 billion; wholesale and retail trade, which may suffer a loss of at least P93.2 billion to P724.8 billion; transport, storage, and communication—due to expected declines in tourism—which may lose between P11.7 billion to P124.3 billion; are among the worst-hit sectors.

The study said extending the Luzon-wide enhanced community quarantine (ECQ) for another month alone “may potentially cost the Philippine economy at least  PHP150 billion due to the possible declines in household consumption as workers remain unemployed during this period.”

The study also showed that based on the distribution of household incomes in 2015, around three in every five Filipinos “have limited capacity to subsist without additional support if community quarantines are extended beyond one month.”

The contraction of economies as a result of the pandemic will also limit the capacity of overseas Filipino workers to send remittances to their families, the study added.

PIDS noted that the pandemic has already caused a “significant decline” in crude oil prices in the first quarter of 2020 as countries began to impose lockdowns and cross-border closures to contain the spread of the viral respiratory disease.

“Similarly, the stock market has been dwindling, which is considered as an indication of a diminishing market confidence,” the Philippine think tank added.

The study warned that if this current trend continues, it may  “directly impact the country’s prospects for export growth in the near term.”

It likewise warned of of the negative effects of disruptions in both local and global supply chains, particularly “in the delivery of final goods for consumption and the production of other goods and services that rely on intermediate inputs.”

‘Risk-based strategy’

Among the recommendations of the study included calls on the government to undertake a “gradual and calibrated transition to a risk-based strategy that combines relaxation of economic restrictions while controlling the spread of the virus.”

The study also urged the deployment of a massive safety net to ensure that households have access to food and other basic necessities.

“(I)nterventions must not only be confined to the poor, displaced workers and other at-risk population but also to firms, particularly micro-, small- and medium-sized enterprises,” the study said.

It also recommended the promotion economic activities while strictly implementing safety protocols.

The study proposed, among others, tapping businesses in the government’s intervention efforts against COVID-19 like garments factories to produce personal protective equipment sets and distilleries to produce rubbing alcohol.

It added that “other businesses may need to be developed” such as the research, digital platform deliveries, manufacturing, among others, to supply goods and services that cannot be readily sourced from the international market.

Public transportation systems must also be allowed to operate partially to facilitate the movement of essential economic transactions, the study said.

But it reminded commuters must strictly follow the guidelines on social distancing.

The study also said that the government may “opt to directly hire drivers or operators in a cash-for-work program to effectively control public transportation”.

Public officials are also called on to “ensure the continuous and unencumbered flow of goods and services” during this crucial period.

The study urged the government to protect and provide enough supplies to the country’s frontline health workers, and strictly implement safety protocols to ensure that COVID-19 does not spread throughout the supply chain.

To date, Philippine health officials have so far confirmed 5,660 COVID-19 cases.

A total of 362 patients have died while 435 others have recovered.

President Rodrigo Duterte earlier placed the entire Luzon under an enhanced community quarantine as the number of COVID-19 cases in the country continued to increase.

The quarantine became effective on March 17 and was initially set to be lifted on April 13.

The quarantine period, however, has been extended until April 30.

GSG