Post-lockdown scenarios

Last week, Gov. Gwen Garcia called out a netizen who vented her frustration on the transitioning of the Province of Cebu from ECQ to GCQ, which resulted to the beneficiaries’ disqualification from the second tranche of the national government’s Social Amelioration Program (SAP). 

Too bad, the Commission on Human Rights dipped its hands into it as well. Wherever this fracas may lead to, we do not know. What is certain is, at least, it mirrors two kinds of approaches that which, depending on our choices, will determine our future and that of the country’s economy.   

On one hand, the netizen emphasized the dole-out or the SAP. The question is, should a transition from ECQ to GCQ be dependent on the need of our countrymen for the dole-out?  Is it not based on the degree of the threat of the virus with due consideration of available scientific data or analysis. If it is purely need-based, then, we shall all become parasites. We will only live while the host (country’s coffers) is still alive, or, simply put, still have money to give. 

On the other hand, if based on available scientific data or analysis, we are, indeed, ready for the transition from ECQ to GCQ, then, by all means, we should. The rationale is simple. We will start reopening our economy. Though not all of us may be able to work productively, at least, 50% of the labor force will now start earning for their families. It simply means, less burden for the near cash-strapped national government. More importantly, businesses will be able to start paying taxes to the government.  

Indeed, realistically, our future shall totally depend on the extent of the coronavirus’ devastation and the time we need to contain this disease. If its devastation isn’t that huge and will be contained the soonest, the economic implication may not be that severe. Otherwise, expect that our recovery efforts will be an uphill climb. 

For one, as early as April 3, the Asian Development Bank (ADB) already said that “our economic growth will slow significantly this year before a strong rebound in 2021, with expansionary fiscal and monetary policies partly offsetting slower domestic demand and disruptions in tourism, trade, and manufacturing.”

In its annual flagship economic publication, Asian Development Outlook (ADO) 2020, “ADB projects the Philippines’ gross domestic product (GDP) to grow at 2.0% in 2020 following an “enhanced community quarantine” imposed by the government in March to stop the spread of the novel coronavirus disease (COVID-19) in the country.” 

However, ADB expects “a strong recovery to 6.5% GDP growth in 2021, assuming that COVID-19 infections in the country are curbed by June this year.”

Again, as emphasized, this scenario is only possible if the infections in the country shall be curbed by June this year. However, as we tore the month of April from our calendar, two credible institutions made its own projections in early May (or, in a just a month). Sadly, Fitch Ratings projects that the country’s economy will contract by 1% this year. Fitch Solutions, on the other hand, had it at 2%. 

Moreover, Fitch Ratings said that “the 2020 forecast is uncertain and subject to considerable downside risks depending on how the virus runs its course globally and domestically and the possibility of a further extension or re-imposition of lockdown measures.”  It further said that “the pace of newly reported cases shows signs of flattening, but the virus nevertheless continues to spread, and partial lockdown measures that were introduced in mid-March have been extended through at least May 15.” Clearly, therefore, contraction could even be worse as lockdowns are extended in some highly urbanized cities. 

Considered as a black swan to many, we have to be reminded that this coronavirus is affecting all economies in the world. Sadly, while we are currently battling the virus per se, the aftermath could be more disastrous. Yes, as this will drag further, we will soon realize that the greater concern will not just be our health but our livelihood as well. 

Undeniably, while the global economy shall surely take a hit and some businesses shall either slow down or fold up, unemployment will certainly rise. For wealthy economies, they can just devour their unemployment insurance funds. For poorer countries, they must also have to, probably, cope with social upheavals.   

Though in early April, while the ADB emphasized that the infra-related efforts, relief measures and private consumption may certainly reinvigorate the economy, the latter may yet remain questionable. 

Remember, with these experiences, lessons are learned and the fear of the unknown obtains. Consequently, with the extent of the financial aftershock still unknown, loan defaults for businesses (not health-care and food related) will surely rise. 

Therefore, with non-essential businesses slowing down, do not expect much consumption from them. More so with pure wage-earners (who used to swipe their credit cards with relative ease) who will berendered jobless, they will also be card-less by then. 

In fact, with so much uncertainties, even those with stable jobs will limit purchases and save more to prepare for another wave.  Consequently, demands for products and services will be scarce. 

Clearly, therefore, the sooner that we can reopen the economy, albeit, slowly and safely, the better.