Economic scars seen deepest in Philippines

MANILA, Philippines — The Philippines is expected to suffer the worst economic scarring effects from the pandemic in Asia-Pacific amid its meager fiscal response as well as its difficulty in containing new waves of the virus.

In the latest economic scarring scorecard of London-based think tank Oxford Economics, the Philippines ranked at the bottom among 14 other major economies in the region with a score of -1.2.

The Philippines got negative scores in four of the five categories considered, namely decline in activity in the crisis year, recovery of potential economic drivers, health-related scarring, and structure of the economy. It only scored a minimal 0.3 in the policy offsets category.

In particular, Oxford sees difficulties in investment growth, workplace mobility, employment and GDP growth.

“Ranked at the bottom of our scorecard is the Philippines as it struggled to contain outbreaks since the pandemic took hold. At the same time, the fiscal response has been meager given the stringency of its lockdowns,” Oxford said.

Fiscal spending in the country is less than two percent of GDP compared to a high of 7.5 percent in other countries in the region.

“Investment in the Philippines was still 25 percent below pre-COVID-19 levels in the first quarter and the unemployment rate in the second quarter was nearly double what it was before the pandemic,” it said.

Based on the scorecard, India got -1 and Indonesia -0.3 following the surge in COVID-19 cases and the spread of the new variants.

“Our scorecard supports our forecasts that India and the Philippines will experience the largest declines in output relative to pre-pandemic trend growth by 2025,” Oxford said.

“We expect them to experience especially large losses given sharp falls in investment and higher unemployment rates,” it said.

Of the 14 economies, Taiwan got the highest score at 0.7 as the surge in world trade and booming electronics exports will likely lead to higher investment and productivity in Taiwan.

Better scores were also recorded in China, New Zealand, Singapore, Japan, Korea, and Vietnam, Australia and Hong Kong.

A higher score indicates less impact on activity during peak 2020 lockdowns, stronger recovery prospects, better containment and health prospects, more effective policy support and less vulnerable economic structure.

Oxford said the successful containment of the outbreak last year saw a swift normalization in activity in Taiwan, Vietnam, China and New Zealand, with GDP returning to pre-pandemic levels by the third quarter.

The huge pandemic-related fiscal responses of other economies also limited the impact of labor market hysteresis with the unemployment rate falling back from its peak.

“Our analysis suggests some risks that long-term GDP losses may be larger than our current projections. We expect renewed virus outbreaks and a subsequent retightening in restrictions to delay the economic recovery, particularly in Southeast Asia,” Oxford said.

“Low vaccination rates also leave many in the region vulnerable to COVID-19 setbacks and the risk that the extent of economic scarring is much greater than we currently project,” it said.

Latest government data showed that some 17.1 million doses have been administered since vaccination started in March.

About 5.5 percent or 5.98 million Filipinos have been fully vaccinated while those who were given at least one dose reached 11.08 million or some 10.3 percent of the population.

“The COVID-19 pandemic will have a lasting negative impact on Asia Pacific economies. We forecast regional GDP to be 2.9 percent lower in 2025 than our pre-pandemic projections. And if vaccines prove less effective to future strains, we estimate the loss in output across the region could be double our baseline,” Oxford said.