Neda has proposed that the country be put into the more lenient quarantine level—modified general community quarantine—by March. This proposal makes a lot of sense considering that the country is limited in bringing back business and consumer confidence as result of the restrictions. As data of cross country performance in 2020 are now mostly out, we find that the long quarantine restrictions have weakened confidence significantly that the country’s economic decline was the deepest among the Asean 6 (Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam). Secretary Ramon Lopez of the Department of Trade and Industry is in the right direction in saying that we are not recovering faster than our neighbors.
Comparing the country’s performance in the last quarter of 2020 with our Asean neighbors reveals that the country’s quarter on quarter gross domestic product grew by 5.6 percent, second only to the 6.9 percebt of Vietnam. This is good performance considering that much of the country was in general community quarantine then. Likewise, Indonesia and Malaysia posted QoQ declines as they grappled with the second wave of the virus. In addition, the Google Mobility report shows that consumer confidence was boosted up significantly in December when retail and leisure activities moved up more than 20 percent from their levels when the quarantine restrictions were first implemented in March 2020. People in the retail sector and some in fast food confirmed that this was the case as sales showed significant recoveries in December. This was the time that people were concerned that a mid-January surge is about to happen as people went shopping in many crowded places. However, we are now in the middle of February and the latest data from Department of Health show that the expected surge did not occur. Hospitals’ Covid facilities that were prepared for the surge remain less than 30 percent occupied. These are encouraging signs, suggesting that people are conscious and careful about the importance of health protocols. It is saying that despite the stricter quarantine, the country can create economic activities because of traditions.
Nevertheless, the same Google mobility reports show that just after the season ended, the confidence that was observed in December went back below the March 2020 levels. In a normal year, that is also observed as people tend to overspend as they also received their 13th month pay and bonuses in December. As resources dried up and with an unemployment rate of 8.6 percent, it is understandable that activities are muted once again.
Despite these, the data show that we can balance economic activities with health needs. This seems to be the message of the economic team. The government have already supported the private sector through various programs in Bayanihan I and II. Private sector response has been limited as it grapples with limited mobility of the work force. The weak business confidence is also reflected in the flat growth of loans, suggesting that the resources provided by the government to increase economic activities are not being utilized to the extent desired. The infrastructure push of government is also hampered by lack of utilitization of funds allotted for it, possibly due to limited participation of private contractors. This has led to the Bayanihan 2 funds being extended to June this year. Thus, increasing stimulus alone will not be enough if they are implemented in a strict quarantine environment.
The other side of this opening is the capacity of government to ensure that health protocols are religiously followed across the country to control the pandemic. Almost a year into this, we still lack a common and single approach to contact tracing. Local government units have their own approach in test, trace and isolate. This part should be done better already as falling numbers of infections is really a better measure of confidence for business and consumer to go back to their economic activities. It should be noted that the number of cases has remained at a rough average of more 1,000 per day since November. The cases are observed to be falling in National Capital Region but they are going higher outside the capital. This is a sign that we still have limitations in addressing the spread of Covid outside key urban areas. Hence, what is crucial in loosening quarantine restrictions is the ability to ensure a uniform approach in testing, tracing and isolating across the country. We need to have cases going down as can be observed with previously high case countries like Bangladesh, which has seen its daily rate dramatically go down to less than 400 today from highs of more than 2,000 per day in November 2020.
A combined falling rate of infections with the arrival of vaccines will be a significant boost to confidence in the economy. The call of the economic managers should be complemented by better implementation of health protocols across the country so that the resulting economic benefits can be maximized, avoiding the risk of possible return of restrictions.