Ateneo economist sees ‘swoosh’ economic recovery

MANILA, Philippines — Economic recovery in the country will more likely be swoosh-shaped as some capacities have been lost in the past six months when mobility restrictions were enforced in response to the pandemic, said an economist of the Ateneo de Manila University.

In a presentation made during a forum hosted by the Foreign Correspondents Association of the Philippines (FOCAP) Monday, economist Alvin Ang said restoring the confidence of businesses and consumers, as well as the reinvigoration of the agriculture sector, would be key to recovery in the short term.

In the near term, however, the country should brace for a level of recovery that may be much slower compared with the strong growth trajectory of the past decade.

“Everybody wants a V-shaped recovery, but very clearly this is not possible because our growth path has changed. It’s not like after six months we will go back to where we were going before. Many countries like the Philippines will go through a path like what is known as the swoosh. You will go down, but you will go back again but the level of growth is not the same,” said Ang, who is also the director of the Ateneo Center for Economic Research and Development.

“That is why if our average level of growth for the last decade was six percent, probably we will go down to 4.5 percent and build up from there because we have lost some capacities already in the last six months.”

The government expects the economy to contract by 5.5 percent this year, with a range of 4.5 to 6.6 percent as various internal and external risks pile up on top of the new coronavirus pandemic.

Acting Socioeconomic Planning Secretary Karl Chua had said that after this contraction, the economy is expected to bounce back to a positive growth level of between 6.5 to 7.5 percent in 2021 up to 2022.

This assumes that the gradual recovery in activity will continue in step with the reopening of the economy and that community quarantine restrictions will no longer be tightened. An effective resumption of public transportation to improve mobility is also seen crucial to recovery.

Other than the pandemic, other internal risks remains such as weather disturbances and the possible occurrence of La Niña in the fourth quarter of the year, and the resurgence of animal diseases like the African Swine Fever.

Disruptions in the transport value chain and logistics, as well as the limited absorptive capacity of agencies implementing the Bayanihan 2 stimulus package, also poses risks to economic performance this year.

On the external front, geopolitical tensions, particularly around the trade war between US and China, as well as lower remittances from overseas Filipino workers are also risks to the economy.

“Ultimately, recovery is a function of confidence. All of these is a confidence issue,” said Ang.

“We need a clear protocol for every industry, for every economic activity, because a general protocol will only work in the general sense. But each industry has a way of doing things and we have to respond to that,” he said.

“This is also an opportune time to revive the agriculture sector – the only sector to defy the downturn during the second quarter – because of its economic impact in the regions,” said Ang.

“This is an opportunity to bring back agriculture because across the regions, it still has a bigger impact. We just need to have very clear-cut policies on how to go about this, not limiting ourselves to one to two products,” he said.

The economy plunged into a recession in the second quarter of the year with output contracting by a record 16.5 percent after a severe coronavirus lockdown paralyzed 75 percent of the economy during the period.

After the downward revision of first quarter economic decline to 0.7 percent, this brought the first half contraction average to around nine percent.

It is widely expected that the contraction will be slower in the third quarter of the year as the economy gradually reopens.