OF SUBSTANCE AND SPIRIT
It is scary, this recent economic briefing of Socioeconomic Planning Secretary Karl Chua on the cost of coronavirus pandemic that is in progress. He estimated the total cost of both the sickness and quarantines on the present generation. Then he calculated the impact on the future generation based on the net present value for comparable assessment.
The results are staggering, eye openers to those of us who would have to suffer the cost of the government’s mishandling of this whole pandemic crisis.
For the year, Sec. Chua cited a total cost of ₱4.3 trillion in terms of foregone consumption, ₱2.1 trillion; private investment and returns, ₱1.8 trillion; and human capital investment and returns, ₱0.4 trillion. For the next 10 to 40 years, our planning authority calculated over ₱37 trillion or a total of ₱41.4 trillion. This is slightly over two years of current GDP of the Philippines.
Both consumption and investment are likely to drop in the next 10 years because of the decline in demand in sectors affected by physical distancing like tourism, restaurants and public transport. Tax revenues will definitely suffer and based on NEDA’s estimate, it would take 10 years before the economy regains its pre-pandemic growth path.
Workers’ productivity is also expected to decrease. What is sad about this is that the dent on productivity is believed to be permanent.
These are the pandemic scars on the economy.
What does NEDA recommend to manage this pandemic’s destructive effects?
Two courses of action are suggested by NEDA and they are just daunting. NEDA would like us first, to ensure strong recovery in 2021 and 2022 by accelerating vaccination, managing risks better and implementing the economic recovery program. And second, to work with Congress on appropriate budget program.
Unfortunately, the recent business news and some data sets would attest that while these recommendations appear appropriate and reasonable, the prospects are not too bright.
First, our vaccination record remains limited. Of the targeted 70 million for vaccination, only about 18.6 million as of Sept. 19 have received it, or around 17 percent of the population. If the other 22.8 million receive their second jab, we should have nearly 41 million or 37 percent of the population. This record speaks for six months of work. If we include minors because they have turned out to be potential carriers and victims, too, it would take us nearly another year to reach the target. Increasing the herd immunity target to 80-90 percent of the population plus a booster shot will bring us farther from a safer level.
But the broadsheets reported that in the 2022 ₱5.024 trillion proposed national budget, the anti-insurgency allocation was increased while the budget of the Department of Health (DOH) was even reduced in the face of the continuing health pandemic.
The National Task Force to End Local Communist Armed Conflict’s (NTF-ELCAC) allocation will rise from this year’s ₱19 billion to ₱28.1 billion. In contrast, the DOH’s budget for its COVID-19 response including the procurement of vaccines was slashed from ₱73.99 billion to only ₱19.68 billion. Government hospitals’ budgets were also cut particularly those with overwhelmed facilities due to COVID-19.
Are we serious in containing this pandemic?
Second, management of the health risks is also crucial. But how does one safely open the economy, allow limited face-to-face schooling and implement granular lockdowns? Alert levels have been introduced into our alphabet community quarantine system but this is limited only to the National Capital Region (NCR). We have not heard that a centralized digital data base system has been designed, developed and made operational to allow granularity in health decisions.They should be guided by processed information from the ground through algorithm and data science.
Utmost care should be taken by our authorities before embarking on an exit strategy. True, the OCTA Research this week declared that the Philippines might have peaked in its coronavirus surge after posting weekly declines in infections since May. Note that its overall assessment says the surge remains at a “very high” level. One resurgence can easily overwhelm the healthcare system in NCR with 69 percent and 77 percent utilization for hospital beds and intensive care units, respectively.
Finally, given the Senate hearing that has exposed unconscionable misuse of public money in this crisis, our planning authority’s call for a reprioritization of the national budget is most welcome. For instance, infrastructure is good, but not all of them are urgent. Counter-insurgency is also important to secure the state but people also rebel because they are sick and hungry, abused and oppressed.
Beyond budget issues, our economic recovery continues to be uncertain because its context is inhospitable. Oxford Economics reported that the latest Global Risk Survey for September for 129 businesses indicates more negative sentiment over the growth prospects due to the Delta variant and supply-chain disruption. It is not surprising why the BSP forecasts tourism receipts to plummet by 80 percent this year. As highlighted by UK-based Pantheon Macroeconomics, the BSP’s recent quarterly consumer expectations survey points to some consumer respondents who postponed their big-ticket purchases. Households expect to save more, rather than spend, because they are uncertain of the pandemic’s duration. Some cannot afford to spend because many of them lost their jobs.
This is how the economic scars of the pandemic work. Deep and of long duration, those scars could be more debilitating if they would heal later than sooner.