Economic managers see 'lower than expected' growth amid prolonged lockdowns

MANILA, Philippines — The return of strict lockdowns that crippled the country's business centers anew likely slashed nearly 1% from the country's economic growth for the entire year already, a serious repercussion for the government's failure to control coronavirus spread.

"I think it's going to be lower than what we expected," Finance Secretary Carlos Dominguez III, who is penciling in a "one half of one percent" reduction in gross domestic product as a result of lockdowns, told Bloomberg on Tuesday. 

"We are coping with this surge and the best way to do it was to have a curtailment of activities," Dominguez added.

But Socioeconomic Planning Secretary Karl Kendrick Chua was more pessimistic. His estimates released Monday showed the enhanced community quarantine (ECQ) in Metro Manila and four surrounding urban areas likely shaved off 0.8% points off growth this year, adding a warning that further extensions would be extremely damaging to the economy.

"ECQ alone does not reduce cases. It simply buys time," Chua said. "Thus, we need to further intensify testing, tracing, quarantine, isolation, treatment, and vaccination."

The return to tough restrictions a little over a year since the pandemic hit home is tempering the Duterte administration's hopes for a rebound this year. Economic officials are set to review on Thursday their already watered-down target of 6.5%-7.5% for this year, which has now become difficult to achieve.

The government originally hoped for a one-week ECQ in the capital and nearby areas as hospitals start creaking again under the weight of surging infections, inevitably dampening optimism of a quick economic rebound in the first quarter. But that was not enough to rein in rallying cases, triggering another week of ECQ. Meanwhile, mass inoculations, pledged to start early, have been relegated to late second quarter, delaying a revival of consumer confidence critical to get the economic engine going. 

NEDA's estimates showed the prolonged ECQ came at the cost of 252,000 more jobs and 102,000 more poor Filipinos. This, in turn, translated to a daily household income loss of P2.1 billion, or almost P30 billion for the two-week period.

Not all is bad news however. According to NEDA, the restrictions is estimated to help avert 215,320 cases and 4,026 COVID-19 deaths

But unlike last year's ECQ, the government provided insufficient safety nets for affected families this time amid economic officials' continued hesitation to spend big to protect the country's credit ratings. Each poor family affected by fresh lockdowns is entitled to receive aid amounting to P4,000, much lower than the P5,000-P8,000 assistance given last year. 

As it is, economic officials are sticking to being fiscally "prudent" despite the country's growing pandemic needs. In same interview on Tuesday, Dominguez said the government will once again tap the US bond market "before rates skyrocket"  but did not disclose the amount to be borrowed and the timeline for the new debt plan. From there, the government will start "winding down" debts "sometime next year". 

"At this point in time we dont have any plans to introduce new tax measures. We have to look at potential revenue sources," he said.