THE latest government estimates of posting a zero GDP growth this year due to the coronavirus 2019 (Covid-19) will lead to lower incomes and cost at least a year’s worth of efforts to reduce poverty.
The National Economic and Development Authority (Neda) and local economists believe that zero growth will be a setback to the country’s efforts to reduce poverty to 11 percent by 2022.
Last week, Finance Secretary Carlos G. Dominguez said in a televised briefing that GDP would contract by 1 percent or post zero growth this year.
“That’s Neda’s forecast, assuming [there is] no Covid-19 letup until yearend. Zero growth means real GDP standstill—same pie for more people, many of whom without work and income,” Socioeconomic Planning Secretary Ernesto M. Pernia told the BusinessMirror over the weekend.
“[Per capita income will be] lower generally. But of course, we have to forestall zero or negative growth with the right stimulus,” he added.
University of the Philippines School of Economics (UPSE) Professor Toby Melissa C. Monsod explained that zero growth simply means the sum of goods and services produced last year will be the same this year.
While this may look harmless at the outset, Monsod said given the population growth, this will ultimately mean lower per capita incomes for all Filipinos.
The Commission on Population and Development (Popcom) earlier estimated that the Philippine population is expected to post a 1.38-percent increase this year compared to 2019. This, in absolute terms, means an addition of 1.48 million Filipinos this year.
The World Bank estimated that based on 2018 data, the country’s GDP per capita was at $3,102.7. This means, if the country’s real GDP was divided according to the population, each Filipino will have a GDP per capita of this much.
“For the Philippines, this means losing some of the hard-earned gains the economy has achieved in recent years,” University of Asia and the Pacific School of Economics Dean Cid Terosa told this newspaper over the weekend.
“Since growth rates are compounded over time, a zero growth rate means missed opportunities to raise production further, boost income higher, and create more and better jobs. It’s a harrowing economic event not only for developing countries but also for developed countries,” he added.
Unionbank Chief Economist Ruben Carlo O. Asuncion told the BusinessMirror the most dangerous part about having zero growth is the fact that the economy has been “frozen” and unable to generate sufficient jobs for Filipinos.
This is the same risk that the government took when it imposed a community-based quarantine. The freezing of the economy, Asuncion said, entails fewer jobs being created and a number losing their current jobs.
With no or lesser incomes, Ateneo de Manila University Policy Brief, Ateneo Center for Economic Research and Development Director Alvin P. Ang said the government’s poverty reduction efforts could be set back by at least a year.
Ang said, however, more data is needed to determine how much damage Covid-19 inflicted on poverty reduction efforts.
Reducing poverty means helping more Filipinos get out of poverty primarily through higher incomes. Currently, the country’s poverty rate is at 16.6 percent, using 2018 data obtained through the Family Income and Expenditure Survey.
Sparkplugs
Economists said efforts to boost the economy start with the government’s spending for various infrastructure projects, which is expected to cost around P7 trillion in the medium term.
The government’s infrastructure initiative includes 100 flagship or “game-changing” projects as well as over 4,000 projects included in the medium-term Public Investment Program (PIP).
Asuncion said the Build, Build, Build program of the government as well as other construction activities should continue or begin as soon as the situation allows it.
“Traditional consumption, as we know it, may take time to resume, but online retail and food should continue to rise. International travel may also take time but local tourism should immediately catch on,” Asuncion said.
“Car buying may increase as people may deem it safer than public transport, but I think, it would be the motorcycle or e-bike sector [that] may flourish instantly,” he added.
Monsod, meanwhile, said the “sparkplugs” that would re-ignite the economy’s engines would include food supply chain-related goods and services as well as agriculture production.
She added that back-end industries that support agriculture production, related manufacturing and processing would also provide the economy some boost post-Covid-19.
Further, Monsod said, industries that were involved in strengthening the production or delivery of health and medical services will also contribute to running the economy.
“[We] can probably eliminate industries that rely on foreign demand [travel, tourism related], and consumption demand [retail] unless for necessary goods and services,” Monsod said. “Construction of course [would help] but more to augment/improve facilities needed to improve supply chains [as well as] transportation and telecommunications.”
Image credits: Roy Domingo