‘We have to dance with the virus’

MANILA, Philippines — As the raging pandemic had sent the economy into a tailspin, it’s best at the moment to “dance with the virus,” as recovery could be better achieved if the health crisis is “squarely addressed,” the country’s acting chief economist said yesterday.

“We have to learn to dance with the virus, two steps  forward, one step backward, if needed,” National Economic and Development Authority (NEDA) officer-in-charge Karl Kendrick Chua said at a virtual press briefing. He stressed “the need to address health problems squarely before we see better recovery.”

Chua welcomed the two-week enforcement of modified enhanced community quarantine (MECQ) in Metro Manila and nearby provinces, saying it has given concerned agencies time to strengthen the healthcare system.

“That is better than we are unable to act and allow many more to be infected with the disease,” he said.

“This is a health issue primarily, so we have to address the bottom line issue which is on the health side. And that is why we agreed to have this two-week period so that we can address that. So that when we are able to do so, the economic recovery and confidence will come back better,” Chua stressed.

He reported that only half of the economy is open under the MECQ in Metro Manila and surrounding provinces and the imposition of general community quarantine in other parts of the country.

Chua said the decision to revert to a stricter MECQ until Aug. 18 is just a stop-gap measure to slow down the transmission of the virus within the community.

He acknowledged that an MECQ status would still have an impact on economic growth. “First of all, we have to be cognizant of the fact that this virus is not going to go away easily,” he said.

“The reality today, and this is what more countries and more experts are realizing and telling us, is that the virus is going to stay for a longer period of time and that the vaccine will take some time to reach us,” he said.

The government is ready to finance vaccines for the poorest 20 million, Chua said, citing statements from Finance Secretary Carlos Dominguez III.

The country plunged into a recession in the second quarter with output contracting by a record 16.5 percent after a months-long government-enforced lockdown paralyzed 75 percent of the economy.

This was the worst quarterly slump on record since the contraction of 10.7 percent in the third quarter of 1984 and 10.5 percent in the first quarter of 1985.

Crushed expectation

The severe economic contraction in the second quarter has effectively crushed expectations of swift recovery in the coming quarters, according to economist JC Punongbayan.

Interviewed on The Chiefs on One News Tuesday night, Punongbayan said the weak fiscal response, continuing struggle to contain the spread of the coronavirus and issues on the government’s Build, Build, Build program would make it even more difficult to get out of the slump.

“If we look at the economic decline, it’s really a nosedive. And economic recovery is tied to the pandemic,” he said.

The Philippines now has the worst COVID-19 outbreak in ASEAN with confirmed cases breaching 120,000.

Punongbayan said the public health crisis has become difficult to manage as a result of the government’s delayed response during the initial outbreak of COVID-19 in the country.

“We have to live with the fact that we missed the golden opportunity in January when we could have contained the crisis,” he said.

He was referring to the weak capacity for testing, contact tracing and isolation between January and February when the first cases in the country were reported.

Had the country stemmed the spread of the virus earlier, it would have been easier to reopen the economy after the severe lockdown implemented from March until May.

“We are already in the second ECQ at the request of health workers. Until we bring the pandemic under control, it looks like we cannot recover swiftly,” said Punongbayan.

Weak fiscal response amid the recession, he said, will also hamper recovery, as the value of the administration-supported stimulus bills cannot easily replace the value lost in the economy during the protracted lockdown.

The P140-billion Bayanihan to Recover as One bill, designed to infuse liquidity into firms by way of loans, equity investments and credit guarantees, still pales in comparison to the hundreds of billions in economic losses during the lockdown, he said.

Stimulus measures

For the local business community, it’s necessary for the government to adopt stimulus measures and allow full resumption of business in order for the economy to recover from recession.

“That we will go into a recession is no longer surprising. I had advised our members not to expect the second, and maybe even the third, quarter numbers to be better unless government acts fast to adopt and implement stimulus packages and allow the full resumption of economic activities,” Philippine Chamber of Commerce and Industry (PCCI) president Benedicto Yujuico said.

In a statement, PCCI said the P140-billion stimulus package under Bayanihan 2 may not be enough as it pushed for the passage of the Accelerated Recovery and Investments Stimulus for the Economy or ARISE bill.

ARISE aims to provide P1.3 trillion worth of stimulus funds for infrastructure projects, mass testing, wage subsidies and other assistance to sectors struggling with the impact of the COVID-19 crisis.

Yujuico said other economies in the region have performed better than the Philippines with their bigger stimulus packages.

He said Indonesia has a stimulus package amounting to $47.6 billion, while Thailand has earmarked $59.7 billion and Vietnam has approved $7.6 billion.

“Businesses will need substantial fiscal and non-fiscal support to survive and fully recover,” he said.

He said the extended lockdown to contain the spread of the virus has already hurt the economy and having it in place for much longer would make it more difficult for businesses to get back on their feet even with fiscal support. As such, he said the government should allow full resumption of economic activities.

Yujuico said small businesses are already having cash flow and liquidity issues as they have to pay taxes, compounded rents, loans and interest charges, utilities and manpower with negative returns.

Even if businesses can tap loans to support operations, he said some no longer consider such an option. “They are wary because it could lead to bigger loans,” he said.

Optimism remains

But House ways and means committee chairman Joey Salceda said there is still reason to be optimistic despite the gloomy economic picture.

“This is a bad number, but this is best understood in perspective. Even with 50-70 percent of mobility paralyzed, the Philippine economy can still perform at about 80 percent capacity. If that is not the definition of economic resilience, I don’t know what is,” Salceda said in a statement.

The Albay representative earlier repeatedly said that the country’s economy has strong fundamentals and that it would not suffer as much as its Asian neighbors.

Latest figures, however, showed that the Philippines had the steepest second quarter decline among its neighbors.

Salceda explained that while such recession was expected due to lockdowns enforced to curb the spread of COVID-19, the Philippine economy has strengths to help expedite recovery.

Sen. Joel Villanueva said the 16.5 percent contraction of the economy should serve as a warning to policymakers not to rely on lockdowns alone to contain the spread of COVID-19.

“Our policymakers should not rely on implementing lockdowns alone. It disrupts the economy and it disrupts lives. Every time a worker is forced to stay home and does not have an opportunity to earn, it hinders access to basic goods and decent quality of life. It also affects our economy since we are largely driven by household consumption,” Villanueva, chairman of the Senate labor committee, said.

Sen. Grace Poe, meanwhile, is pushing for the immediate passage of a bill that seeks to provide greater protection to overseas Filipino workers (OFWs) displaced by the raging health crisis.

Senate Bill No. 1476 or the proposed Act to Further Assist Filipino Migrant Workers filed by Poe aims to entitle displaced OFWs to full reimbursement of their placement fee with 12-percent interest per annum plus their salaries for the unexpired portion of their employment contract. – Czeriza Valencia, Louella Desiderio, Cecille Suerte Felipe, Edu Punay