The Philippines Is No Longer Southeast Asia’s Economic Darling

The Philippine economy has suffered mightily due to the coronavirus pandemic, and according to its Trade Secretary Ramon Lopez, the numbers are grim: The country’s economic recovery is “near the bottom” compared to other countries, Lopez said on February 16.

The country’s gross domestic product fell by 9.5 percent in 2020, the largest drop recorded in government data going back to 1946.

“We’re trailing in terms of recovery,” Lopez said, citing the negative growth rate of the Philippines’ GDP. “If you compare us with other countries, we’re last, especially with our neighboring countries. They also have small [numbers] of COVID cases. But why are they growing or why did their economies fall slightly? We are last.”

The Philippines had been one of Asia’s fastest growing economies prior to the COVID-19 pandemic, during which President Rodrigo Duterte has instituted some of the world’s strictest lockdowns and has ordered police and military officials to arrest quarantine violators on sight.

The country has moved away from the strictest level of restrictions, but many businesses, such as cinemas, remain closed while public transportation in the Metro Manila capital region is operating at 50 percent capacity.

The unemployment rate, which was around 5 percent before the pandemic, rose to 17.7 percent in March 2020 before falling to 8.7 percent in October.

The Philippines has seen a decline in COVID-19 cases, although there have been continuous delays in the delivery of vaccines to the country.

Duterte rejected a proposal by his own Economic Planning Secretary Karl Chua to  jumpstart the Philippine economy by moving the entire country, including Manila, to a less restrictive system called modified general community quarantine, or MGCQ, starting March 1.

Such a move would have allowed more businesses to reopen and public transport operating at 75 percent capacity.

Chua said 2020’s quarantine restrictions had led to an annual income loss of around $475 per employee.

Duterte, however, nixed the idea on February 22 by insisting there would be no shift to MCGQ “unless there is a rollout of vaccines.”

A group of mayors in Metro Manila had recommended the transition to MGCQ by March due to their concerns over the economic impact of the pandemic.

However, some mayors voted against the recommendation, citing worries of widespread infection as the country has not yet vaccinated a significant portion of its population.

“The question is are we ready?” Marikina Mayor Marcelino Teodoro told the Philippine Inquirer, saying a “safe transportation system and vaccination program” would be necessary if movement restrictions are lifted.

The progressive think tank IBON Foundation called the proposed shift to MGCQ “short-sighted and desperate,” saying it would not revive the economy on its own and must be accompanied by increased spending.

“Easing restrictions will not spur recovery without a real fiscal stimulus while risking the more rapid spread of COVID-19,” IBON said in a February 18 statement.

The government “simply has to spend more to help households and small businesses cope with record jobs and income losses and to recover from the economic shock,” it said.

The Philippine government resisted proposals for additional spending and stimulus measures last year and was criticized for reopening its economy too early, leading to a second lockdown in August to alleviate an overburdened hospital system.

Its legislature passed a two-part relief program in March and September 2020 to give cash to low-income households, extend credit to small businesses, and support the healthcare system.

The Philippines said earlier in February it would aim to raise $23.71 billion to alleviate a planned budget deficit and to fund infrastructure projects.

Duterte signed a law on February 16 that helps banks offload bad loans, a measure intended to give the Philippine economy a jolt as it continues on its path toward recovery.