The Philippine economy is unlikely to recover beginning next year due to chronic underspending on health and the government’s anemic fiscal response to the coronavirus-induced crisis, the Duterte administration’s former chief economist said.

At a virtual forum, Former Socioeconomic Planning Ernesto M. Pernia said the country’s economy, as measured by its gross domestic product (GDP), will not return to its pre-coronavirus level in 2021, contrary to the national government’s expectations.

Pernia, who resigned as the National Economic and Development Authority chief in April, said the recession will be worse than expected this year, nothing that the GDP target of minus 4.5 percent to minus 6.6 percent in 2020 is “unlikely to be achieved now.”

In the first three-quarters, the GDP slumped by an average of 10 percent. The economy now needs to grow by at least 6.0 percent in the final three-months of the year to hit the government’s full-year goal.

The Philippine Statistics Authority already conceded that it is not feasible for the Philippines to grow by 6.0 percent in the last quarter due to the current economic condition.

For this reason, Pernia said “it is not likely that we will be going back to pre-COVID situation in 2021.”
At the earliest, the former government official noted that “perhaps in the second-half of 2022, we can be probably already beginning to recover in terms of getting back to where we were before.”

“I would attribute this story to our health system capacity—we have the weakest health system capacity to begin with… as well as government's COVID-19 spending, which is rather conservative,” Pernia said during the virtual Stratbase ADRi Pilipinas Conference 2020.

The Philippines had severely underinvested in health infrastructure, like hospitals, laboratories, among others and badly taken for granted healthcare workers’ welfare, the economist said.

On COVID-19 response, Penia said the government has been stingy, which has also impacted the the country’s health system capacity.

The Philippines’ COVID-19 spending plan of $21.65 billion is the lowest among its neighbors. Indonesia allocated $115.78 billion, Singapore has $89.15 billion, Thailand with $84.09 billion, Malaysia has $80.78 billion and Vietnam with $26.5 billion.

As a percentage of GDP, the country’s coronavirus response is only equivalent to 5.88 percent, lower compared with its ASEAN peers that range between 10.12 percent and 25.35 percent.

“Our spending has been rather pathetic, even compared with Vietnam, which is still at the lower income per capita than the Philippines, although Vietnam has been growing faster than the Philippines in terms of real GDP, and it's likely to overtake us again,” Pernia said.

In 2021, the Duterte administration expects the local economy to grow by around 6.5 percent to 7.5 percent.