First of two parts
The year 2020 will go down in Philippine economic history as the worst since the end of World War II.
The arrival of the Covid-19 pandemic triggered a full-blown health-economic crisis. The crisis is continuing and there are indications that it will spill even to 2022 and beyond. The long-suffering Filipino people will experience more pains in 2021 due to unresolved health problems across the archipelago, collapse of a growing number of businesses (from micro and small to medium and big), widespread joblessness and loss of livelihoods (especially among the informal grassroots entrepreneurs and workers), spiraling prices of commodities, and inability of the government to provide ample social amelioration or social protection for all, including the needed vaccination of the majority of the citizenry.
Why is the Duterte administration unable to contain the virus spread despite having one of the world’s strictest and longest lockdowns? Why is it unable to emulate the economic performance of Singapore and Vietnam, both of which are now registering positive growth?
The reasons are not difficult to find.
First, the government failed to act early and decisively to prevent the spread of the virus. It imposed a national quarantine to contain the spread of the virus only in the middle of March 2020, or two and a half months after the world was informed that a Wuhan virus was circulating around the world.
Second, the quarantine program was launched without a comprehensive and well thought-out medical response. It was primarily a harsh lockdown implemented by the generals who sit in the National Task Force (NTF) under the supposed guidance of a non-consultative Inter-Agency Task Force (IATF) for emerging diseases. The initial “enhanced community quarantine” locked down businesses and banned the movement of people. The results were immediate: 17.7 percent unemployment rate in April 2020. The ECQ was subsequently eased and a series of “modified” quarantine programs were implemented on a rolling basis across the country up to the end of 2020. Still, the economic results for the entire year of 2020 were horrifying: GDP shrinking by almost 10 percent and debt-to-GDP ballooning by over 10 percent.
Third, the pandemic revealed that the Philippines health system was totally unprepared for the pandemic. The health system (especially the government hospitals and public health facilities) is weak, underdeveloped and under-funded. It took the Department of Health (DOH) half a year to align the system with the WHO guidelines and protocols in managing pandemics. Worse, the Philippine Health Insurance Corp. (PhilHealth), which supposedly covers all Filipinos, was found to be heavily hemorrhaging due to widespread corruption. In addition, the public health system has been suffering from decades of government neglect, preoccupation of neo-liberal policy makers to privatize health services, bad health governance, and failure to develop a grassroots-based primary health-care system across the archipelago.
Fourth, the health-economic crisis bared once more the basic structural weaknesses of the economy. Services, the main sector in an economy that has failed to industrialize, immediately went down. Contraction was severe across different service industries such as tourism, entertainment and casinos, hotels and restaurants, education, and malls and department stores.
As to the industrial sector, disruptions in domestic manufacturing were massive. The same goes for its export counterpart, the producers of semiconductors and auto parts.
As to agriculture, the pandemic should have been an opportunity for the agricultural sector to grow because food is essential. And yet, the sector was prevented from fulfilling its potential due to the culture of importation, which was encouraged further by the neo-liberal policy makers in the name of fighting inflation in Covid times. Look what is happening to rice, pork, chicken and other agricultural products.
As to the two lifesavers of the economy—remittances of overseas Filipino workers and earnings from the call center/BPO sector, the situation is complex. Hundreds of thousands of OFWs were stranded in different overseas sites due to similar health-economic crisis in host countries. And yet, OFW remittances monitored by the Central Bank indicate no aggregate decline. Why? During crisis periods, the heroic OFWs tend to save and send more just to help their suffering families at home.
As to the call center/BPO sector, there has been a softening of the demand for call center agents due to the rise of the DIY chat-bots and the obvious decline for their services from some ailing foreign clients. However, there are reports that new lines of BPO services have emerged from the Covid-stricken ICT-dependent global economy.
Fifth, the government was stingy in providing social amelioration to the people and recovery stimulus to those who lost their livelihoods and businesses. Under two successive laws—Bayanihan 1 and 2, the government was supposed to provide social amelioration assistance to 18 million families. It succeeded in reaching 14 million or so in an agonizingly slow manner, with beneficiary families not given continuous survival assistance. Ambulant families and workers with no permanent addresses were usually excluded.
In summary, 2020 was annus horribilis for the Filipino people. The economy and jobs were flattened not by the virus per se but more by the militaristic lockdowns and the poor health-economic programs of the government.
What then is in store for the Filipino people in 2021?
The statement of President Duterte in January 2021 sums up the situation on what is in store for the country and the people: “We are sinking deeper and deeper” (See ABS-CBN News, “We are sinking,” February 01, 2021).
The problem is that there are no “mea culpas” being issued by Malacañang for the poor government responses to the health-economic crisis in 2020. Filipinos call these responses “mga kapalpakan” (botched policies/programs). Nor are there inspiring recovery programs for people’s livelihoods, jobs and businesses.
The National Economic and Development Authority (Neda) announced in the 3rd quarter of 2020 an over-optimistic V recovery program called “Reset-Rebound,” which did not fly. It was quickly changed in the 4th quarter of 2020 into “Recharge Philippines,” with two objectives: reduce morbidity and mortality rate due to Covid, and restart social and economic activities. In line with this, Neda, together with the other agencies in charge of the economy, pushed for the relaxation of the quarantine rules and protocols in order to bring back the economy to its “old normal.” The overall framework for recovery is based on the assumption that the economy will do well if it returns to the “old normal” because, according to the economic technocrats, the economy was doing well in the pre-Covid period.
Thus, in the last quarter of 2020 and at the beginning of 2021, the national government, on the instigation of the economic technocrats and desperate mayors, relaxed the enforcement of quarantine rules and protocols so that the economy can recover by going back to the so-called “old normal.” The problem is that the relaxation decision was made in a helter-skelter fashion amid the following realities on the ground: the medical response system to the pandemic was still in chaotic condition, most of the businesses were still in survival mode given the shrunken market (despite the Christmas season) and the demand for social distancing in all transactions, and the government officials still had no handle on how to protect the general population against the spread of the virus.
The best proof of the incompetent handling of the Covid crisis by the Duterte administration is reflected in the failure of the government to negotiate with the vaccine manufacturers for the early procurement of sufficient quantity of vaccines. The country is unable to get the tens of millions needed to develop herd immunity for a country of 110 million. If there will be nation-wide vaccination, this is likely to be completed only sometime in 2022 or even beyond. Thus, the danger of recurring Covid surges.
Another proof of incompetence is the fact that up to the present, or more than a year after the Covid outbreak, the country still has no reliable system of tracing, monitoring and surveillance of the Covid spread. In fact, the government was caught unprepared when the country saw a dramatic surge in Covid infections in March 2021 despite the warnings issued by some medical experts in late 2020.
Today, the hospitals of Metro Manila and surrounding provinces in Luzon are overwhelmed. The government is forced to revert to the old militaristic ECQ. And the health-economic crisis, which has not disappeared, has worsened. To repeat, the President himself summed up the situation: the country is “sinking deeper and deeper.” So what then is in store for the country, for the working people?
The following are the likely scenarios:
1. The Covid pandemic shall linger in the country in 2021-2022. As explained earlier, the government has botched the containment program and has not outlined the way out for the country. Vaccines or the lack of it shall remain a contentious issue. And so is the government’s mishandling of the health funds under PhilHealth as well as the bad health leadership provided by the IATF and the DOH, both of which are headed by a Cabinet member who seems to be immune from all charges of corruption and incompetence. To counter the Covid pandemic, the government shall have a rolling program of strict and modified quarantines. Like in 2020, this shall continue to pull down the economy. The health crisis shall continue to hobble life across the archipelago, breeding a host of health, social and economic issues and uncertainties.
2. The economy shall remain in the negative territory in 2021. Even credit rating agencies are now openly expressing fears about the prospects for the Philippine economy, the worst performing in Southeast Asia (with the exception of Myanmar, whose military is at war with the people). For the first quarter of 2021, the economy shrunk by 4.2 percent, per latest official reports.
The three major sectors of the economy—services, industry and agriculture—shall have difficulty surviving, let alone recovering. There will be a continuing decline in the deployment of overseas Filipino workers and there will be more displacements among those employed in various host countries. The winners are a few such as those able to establish niches in businesses using the Internet as a platform. Warning: some big corporations or banks might fail and might trigger a domino-like collapse in the corporate world. If this happens, as what happened in 1982-1985 at the height of the recession-depression during the waning years of the Marcos administration, the recession-depression of 2020 will appear mild.
3. Joblessness shall affect more than 10 percent of the labor force. The worst hit are the displaced due to business closures and the young labor entrants who joined the market in 2020 and those joining in 2021. What jobs are waiting for them? And what about those in the informal sector—the street vendors, home-based workers, informal transport operators/drivers, ambulant workers, agrarian workers, etc.? Millions lost their livelihoods in 2020. Most of these livelihoods are not likely to come back in 2021. The same for the businesses of the solo, family and micro entrepreneurs.
4. The government shall continuously engage in deficit spending and massive borrowing. As a result, the national debt problem, which the neo-liberal economists claim have already disappeared, after four decades of back-breaking debt servicing by the nation, is back with the total amount exceeding P10 trillion pesos (over $210 billion) in 2020 and projected to reach over P12 trillion by the end of 2021. The future of Generations X, Y, Z is mortgaged. Ironically, the government passed a new tax law (CREATE) to reduce the tax rate for corporations. This measure, touted by the economic technocrats as the biggest stimulus, is highly questionable because it widens further the government deficits and is targeting investors at a time when the global pandemic is putting a brake on the flow of FDI worldwide.
To be continued on Monday
Dr. Rene E. Ofreneo is a Professor Emeritus of University of the Philippines.
For comments, please write to reneofreneo@gmail.com.
1 comment
Bogus. You people will forever keep on blaming others and the favorite whipping boy-the govErmentt. It has always been that way. Why is it so? The people Itself haS a cultural problem. You educators, have you ever produce something Of value?