Philippines’ coronavirus missteps could make it Asia’s economic ‘laggard’ as recovery seen among region’s slowest

Over the last decade the Philippines had managed to harness its 109-million strong population to drive forward a consumption-led economy
But the pandemic has exposed structural weaknesses that an outsourcing boom and remittances from legions of citizens working abroad papered over

The Philippines

Bloomberg

Published: 11:20am, 20 May, 2021

Why you can trust SCMP

Snaking queues at Manila food banks have become a common sight as the economy continues struggling a year after the Philippines’ first coronavirus lockdown. It is a sharp contrast to 2018, when hundreds lined up for the grand opening of Uniqlo Co.’s Global Flagship Store in Manila, its largest outlet in Southeast Asia.

Over the last decade the Philippines had managed to throw off its mantle as the “sick man” of Asia, with its 109-million strong population driving a consumption-led economy. An outsourcing boom and remittances from legions of citizens working abroad helped raise incomes and lifted at least 2 million Filipinos out of poverty.

But the pandemic has exposed structural weaknesses that the boom papered over, including a decentralised health care system and rampant inequality. The Philippines suffered a record economic slump last year and its sluggish recovery was underscored again on Tuesday, when the government cut its growth outlook for this year and next.

“There’s not much momentum left in this once juggernaut economy,” said Nicholas Mapa, economist at ING Groep NV in Manila. Consumer sentiment is “deep in the red” amid high unemployment and underemployment, he said.

The Philippine economy will not return to pre-pandemic levels until the end of 2022, said Katrina Ell, an economist at Moody’s Analytics Inc. in Sydney. In contrast, China, Taiwan and Vietnam already have returned to previous output levels, while South Korea, Indonesia and Thailand should do so this year, according to Ell. “This makes the Philippines the clear laggard in Asia,” she said.

02:02

Hungry Filipinos in lockdown share food as nation’s Covid-19 caseload surpasses 1 million

Though it implemented one of the world’s strictest lockdowns – including a shutdown of mass transport and a ban on children and old people in public spaces – Philippine authorities only managed to quell the outbreak for a few months before a fresh surge in cases in March forced renewed restrictions.

The economy continued shrinking in the first quarter and is expected to be among the slowest in Asia to recover, leaving lasting scars: even by 2025, output will remain 11.5 per cent below what it would have been if pre-pandemic trends had continued, according to Fitch Solutions Inc.

The Philippines’ handling of the pandemic was hampered by a 1991 law that made city, town and village leaders responsible for the health system. Without uniform guidance, village-level health teams often follow rules set by mayors or chieftains, resulting in a fragmented response to Covid-19.

When Jaypee Sanchez, 33, caught the virus in March, his district’s contact tracer told Sanchez’s close associates that he had tested positive – and asked them to call others they had interacted with.

‘Late and slow motion’: where the Philippines’ pandemic response went wrong

“Tracing stops with close contacts. It didn’t include establishments I’ve been to,” said Sanchez, who’s from the Manila area. “It’s confusing and sad.”

The situation worsened with the mass return of migrant workers who faced loose quarantine requirements and unreliable Covid-19 testing, even as more contagious variants of the virus took hold. The Philippines has recorded more than 1.1 million Covid-19 cases, the second-most in Southeast Asia.

It’s critical that the government improves its Covid-19 management. The Philippines is still in the thick of the crisis

Katrina Ell, economist at Moody’s Analytics

Life in lockdown has worsened already stark inequality. As the virus spread, relatively affluent Filipinos worked at home, ordering in groceries, prescriptions and wine. Meanwhile, the unemployed have grasped at odd jobs as delivery riders or online sellers, with many yet to rejoin the labour force. The country is expected to suffer the highest unemployment rate this year among major Asian economies, according to a Bloomberg survey.

With infections easing from last month’s record, the government now is opting for more targeted restrictions than the blunt lockdown that closed 75 per cent of the economy last year. Mass transport is operating in a limited capacity, and work in most sectors continues.

This time, “instead of avoiding the risk, we are managing the risk,” Economic Planning Secretary Karl Chua said on Tuesday.

In the Philippines, shopping for strangers offers gig workers a pandemic lifeline

Even with restrictions loosened, however, Filipinos have been the least mobile in Southeast Asia, according to Google data. That is an ominous trend for household consumption, which makes up more than 70 per cent of the economy.

The government is slowly rolling out digital contact tracing and is pinning its hopes on vaccines, with total vaccine deliveries expected to reach 21.8 million doses this quarter.

“It’s critical that the government improves its Covid-19 management,” Ell of Moody’s Analytics said. “The Philippines is still in the thick of the crisis.”