MANILA, Philippines — The prevailing coronavirus disease 2019 or COVID-19 crisis will likely slow down Philippine economic growth this year to a range of between negative 0.6 up to 4.3 percent this year, if the adverse impact of the contagion on the economy is felt until June, according to a report by the National Economic and Development Authority (NEDA).
In the report, titled “Addressing the Social and Economic Impact of the COVID-19 Pandemic,” the country’s lead socioeconomic planning agency said the combined effects on both the supply and demand side of the economy, stemming mostly from the effect of the Luzon-wide quarantine, will cause a cumulative loss of between P428.7 billion to P1.355 trillion in gross value-added terms.
This results in total job loss of between 116,000 up to 1.8 million nationwide.
“The government’s swift and appropriate response remains crucial in softening the blow of COVID-19, particularly on the most vulnerable members of our society,” said NEDA.
“Without mitigating measures, this would imply a reduction in the Philippine’s real GDP growth to -0.6 to 4.3 percent in 2020.”
These estimates were made with the assumption that the adverse impact of the contagion to the economy is felt until June, with the brunt experienced during the month-long enhanced community quarantine (ECQ) implemented in Luzon which took effect on March 17 and ends on April 12.
As such, an extension of the community quarantine will lead to even lower growth estimates for the domestic economy this year as Luzon generates 73 percent of the country’s gross domestic product (GDP).
“It also bears emphasizing that attaining the upper bound of 4.3 percent growth rate for 2020 is possible only if we are able to stem the impact of COVID-19 and the enhanced community quarantine to the rest of the economy,” said the report.
“By extension, if the ECQ is extended beyond one month, or if the spread of COVID-19 is unabated even after the ECQ, then even the low-end of the estimate is still too high.”
NEDA estimates the Luzon-wide quarantine alone will cost the economy P298 billion up to P1.1 trillion in losses in gross value added terms, equivalent to between 1.5 percent up to 5.3 percent pf GDP. This leads to employment loss of between 61,000 up to one million in the country’s main island.
Under the quarantine guidelines, only private establishments providing basic goods and services will remain open such as health services, food establishments for takeaway, banking, supermarkets, pharmacies, manufacturing, delivery services, water-refilling stations, money transfer services, and utilities.
Also allowed to operate are business process outsourcing establishments and export-oriented industries.
“In light of this, the losses in these sectors are expected to be lower,” said NEDA.
However, other sectors are likely to bear more significant losses, such as in retail trade because of mall closures; air transport as airlines cancel flights and airports are closed; and in other
manufacturing and service activities that are not part of the food and health-related supply chains.
NEDA also noted that aggressive efforts to contain the spread of the disease, already including the Luzon-wide quarantine, would add pressure on the country’s fiscal position, pushing the national government budget deficit to between 4.4 percent to 5.4 percent of the GDP.
This also considers certain regulatory relief provided for affected sectors such as the extended tax filing, and deferment of payment for parking and landing fees for local airlines to blunt the effect of the crisis on the aviation sector.