Manufacturing, retail-wholesale trade, and government services are the Top 3 most critical economic sectors in the Philippines during the pandemic, a recent study bared.
The study on “Mitigating Economic Losses from COVID-19: Insights from Input-Output Analysis” which was presented in a webinar on “COVID-19: Where We Are and Where We Want to Be” looked at the economies of Malaysia and the Philippines.
The webinar is a part of a series organized by the Department of Science and Technology-National Academy of Science and Technology (DoST-NAST).
With an analysis on five factors – economic impact, connectivity, sector size, income multiplier, and employment – the researchers identified the critical sectors for the economies of both countries.
The mathematical models they developed account for network effects, where changes in a particular sector cause “ripple effects” in other sectors of the economy.
“When a firm goes bankrupt, it disappears from the economic picture. The question is, how far below normal can a certain economic sector dip, because percentage-wise, below a certain threshold level, bouncing back to pre-pandemic level becomes difficult or even impossible,” Raymond Tan, a professor at Dela Salle University (DLSU) and member of the research team, said.
DoST said that Tan illustrated that economic sectors are not monolithic entities, but consists of individual firms. In a given crisis like a pandemic, what happens for instance, in hotels and restaurants, is that these large number of corporate entities might end up going bankrupt because of percentage loss of business, and it is this percentage or fraction of loss that is significant.
He also added that the tourism and travel industry are among the extremely hard-hit sectors in this pandemic but sectors such as telecommunications, finance, logistics, and delivery are booming.
Krista Danielle Yu, also a member of the research team for the country, developed an enhanced input-output model of analysis can help the government identify the critical economic sectors to be prioritized, so that given the limited resources, the government would know where to distribute the stimulus package across sectors of the economy to maximize the benefits.
"The team presented several scenarios for computer-aided allocation of economic stimulus, a scientific approach to maximize the social benefits per peso spent. Effective exit strategies are needed to revive economies during the COVID-19 pandemic," DoST said.
"The Philippine economy has been doing good, due to sustained decades-worth of over six percent growth in GDP. However, there’s been a 16.5 percent contraction during the second quarter of the year because of the pandemic. Compared, though, with Malaysia’s drop in GDP by about 20 percent during lockdown, the country fared slightly better," it added.
“There will be limited resources, but with the use of computer models and with the best available techniques, we can make better decisions and restart the economy in the best way possible,” Tan said, acknowledging the importance of a scientifically-based policy support for planning in the government, which has been what the DoST has been doing.
The research was based on outputs from a project supported by a special COVID-19 grant from Heriot-Watt University’s Global Challenges Research Fund (CGRF). The project involved a team of researchers led by Dr. Viknesh Andiappan from Heriot-Watt University Malaysia, University of Nottingham Malaysia, and De La Salle University.