No quick turnaround after botched-up job

It is not going to be a quick turnaround for the economy in 2021 despite the expressed belief of the Philippine economic team for a strong rebound. The absence of key indicators for this, including the government’s inability to act nimbly, supports this assumption.

We had pinned our hope on the development of a vaccine, and despite success in the manufacture of millions of doses by more pharmaceutical companies, gaining immunity from the virus next year for majority of Filipinos is not going to be an easy walk.

Given our government’s conservative approach to dealing with the pandemic, a return to normal economic activity cannot be expected in the next quarter. While we have seen increased reductions in infected cases and deaths, the recent emergence of a new COVID-19 strains poses fresh threats.

Metro Manila, which accounts for 60 percent of the country’s economic activity, continues to be on quarantine alert, even if the level has already been downgraded to GCQ, or general community quarantine, that allows resumption of more economic activities.

Still, restrictions continue for many leisure and entertainment activities, as well as movement of senior citizens and the youth. Malls are noticeably devoid of crowds even during the Christmas shopping period and vehicular traffic is not the bedlam it used to be.

Lost jobs

Even while more people have been going online to buy things, consumer spending has still been noticeably dampened by the previous months of economic impairment, loss of jobs – some temporarily, some permanently – and the reduced remittance levels by overseas Filipinos.

Too little money is being made available quickly by banking institutions to resuscitate business activity, which has caused unemployment levels to rise; a good 1.4 million Filipinos to date still have not returned to work because of the pandemic.

With the thousands of small businesses permanently closed and with starting a new business still considered risky, people who have become unemployed may not return to jobs soon enough even if Metro Manila’s quarantine levels are further eased to modified GCQ next year.

Reduced remittances

Remittances will likely not dramatically pick up next year as more than 300,000 overseas working Filipinos are now back home because of terminated contracts. This represents a significant loss of income for many Filipino families in the coming months, further dampening consumer demand.

New overseas jobs, of course, will depend on how fast the world’s developed economies – the US and those in Europe – make a quick rebound in 2021 as massive vaccination efforts of their governments get underway to reach immunity levels that allow normal economic activities to resume.

Many of the overseas Filipino workers who lost their jobs are dependent on the global sea trade, which is expected to suffer a dramatic 4.1 percent reduction in cargo volume shipments this year. Gradual growth is seen next year, but still largely dependent on the economic recovery of the US and Europe.

This would mean a return to work for Filipino seafarers later in 2021, with full absorption of those laid off likely only in 2022.

Slow government action

The Philippine economic team is looking at the full resumption of infrastructure projects under the Build Build Build (BBB) program next year. From experience, given the way our concerned government agencies are able to reboot and get organized for any major undertaking, any substantial activity will not be apparent in the first half of 2021.

The original P8.4 trillion BBB program, which had been scaled down to P4.1 trillion this year, was expected to ramp up government spending as a percentage of gross domestic product (GDP) to acceptable levels, thereby contributing to economic growth and job creation.

Some global economic think-tank are also pinning their optimistic growth projections of the Philippines to an effective vaccine rollout, which would fill the gap in the government’s inadequate response to mitigating the virus spread.

Again, given bureaucratic inefficiencies, plus the reluctance of the national government to pour in more money to buy vaccines enough for 70 million Filipinos, the desired herd immunity is a far-fetched dream, at least this year.

Having children vaccinated while classes remain online or outside the school premises is by itself going to be a big challenge. Getting parent to give their permission for their children to be vaccinated after the Dengvaxia controversy is another hurdle.

Botched-up

Taking all these into consideration, a return to a GDP growth of between 6.5 to 7.5 percent would be too optimistic and even a return to the pre-pandemic growth of six percent will be difficult, especially if the recession continues into the first half of 2021.

The current infection levels do not indicate a return to normal activities soon, more so without mass immunization. The Philippines has suffered the worst economic setback from this pandemic in the region and may be the slowest to get out of it. Overall, managing the virus has been a botched up job.

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