Longer PHL recovery from ’corona coma’

by Cai Ordinario, 18 Jan 2021

THE Philippines’s recovery from its “corona coma” could take longer, as the economy will likely post a growth of around 3 percent to 4 percent this year, according to the Ateneo Center for Economic Research and Development (Acerd).

In the Ateneo Eagle Watch forum “Preparing Your Business and Institution in Prioritizing for Recovery,” Acerd Senior Fellow and former Socioeconomic Planning Secretary Cielito F. Habito said the economy may only start to regain its bearings by the second quarter this year.

“It will take three years or more to regain what we lost in 2020. And I’m beginning to wonder whether this is not overly optimistic. If you look at our experience in the 1980s, it took us five to six years after the 1983 recession precipitated by the assassination of Senator Benigno Aquino, for us to recover the level of GDP we had in 1983. In other words, we did not regain that until about 1989,”
Habito said.

“So this time around, it’s even worse, I’d like to think. So before we regain the GDP we had in 2019, it will take us, well, more than three years and possibly, again, even longer than the five to six years we’ve seen before,” he added.

Based on Acerd estimates, the first quarter this year may see a contraction of 1.8 percent before posting a growth of 3.7 percent in the second quarter; 4.7 percent in the third quarter; and 5.1 percent in the last quarter of the year.

This will average 2.9 percent for the year, around 3 percent but if all goes well, the GDP still has room to grow by 4 percent this year.

Inflation

Inflation, meanwhile, is expected to average higher at 3 percent to 4 percent given existing pressures such as the African Swine Fever (ASF).

The country’s employment rate could average 91 percent to 93 percent this year. Unemployment or joblessness could be around 7 percent to 9 percent, given the constraints on the economy.

Meanwhile, John Gokongwei School of Management Dean Luis F. Dumlao said “corona coma” was a term coined by renowned economist and Nobel winner Paul Krugman for what the lockdowns inflicted on the economy.

Dumlao said this has significantly affected the Philippine economy, which saw its trade deficit balloon and its overseas Filipino worker (OFW) remittances decline.

However, he said, one saving grace is remittances which, despite the number of workers who lost their jobs abroad, inflows from those who still had their jobs kept pouring in and offset the country’s trade deficit.

Nonetheless, as far as the pattern of recovery is concerned, Dumlao said it is appearing to be more of a “Nike swoosh” than a “V”, especially when it comes to the actual level of GDP.

In terms of GDP growth, Dumlao said, there may be some credence to the claims of the administration that a V-shaped recovery is going to happen. This is because, as Ateneo Dean of Social Sciences Fernando T. Aldaba said, the economy has “nowhere to go but up.”

“I think we can rule out the V recovery, both in terms of growth rates and in terms of the levels [of GDP]. It’s more likely going to be an extended ‘U’ or, heaven forbid, a ‘W’, where we recover and go down again. But again, the prospect of the resurgence of the virus can make that ‘W’ prospect very real as well,” Habito said.

Habito said the economy’s best bet at this time remains to be the agriculture sector. This is especially the case if the country wants to ensure that its growth is inclusive from here on.

He said the agriculture sector was the best performer in 2020, despite the pandemic and the initial supply chain issues logistics encountered at the start of the lockdowns.

In order to fast-track growth, Habito said, there is a need to invest in technology by harnessing the digital economy and its allied industries.

Technology can help boost the growth of agriculture and agribusinesses through digital tools that improve finance-to-field-to-fork value chains.