The long-term economic cost of the coronavirus and the pandemic-induced lockdowns would be over three-times greater than the multi-trillion peso debt obligations of the government, the National Economic and Development Authority (NEDA) estimated.
Socioeconomic Planning Secretary Karl Kendrick T. Chua said on Saturday, Sept. 25, that the ongoing impacts of the prolonged health crisis and several quarantine measures have already cost the present and future generations of Filipinos about P41.4 trillion.
The massive estimate released by the NEDA dwarfs the total accumulated debt of the Philippine government, which the Bureau of the Treasury said stood at a record P11.61 trillion as of July 2021.
Chua said the estimated losses to the COVID-19 crisis was the result of a six-month study conducted by the NEDA, and its attached agencies as well as the country’s development partners.
“The present and future costs are estimated at P41.4 trillion in net present value terms. Broken down, in 2020, we lost P4.3 trillion; in the next 10 to 40 years, we estimate that we will to lose up to P37 trillion,” Chua said in a statement.
Chua added that consumption and investments are likely to be lower in the next 10-years due to the reduced demand in sectors that require social distancing, such as tourism, restaurants, and public transportation.
Consequently, tax revenues will be lower if businesses cannot operate at 100 percent, the NEDA chief warned.
According to Chua, the estimated total loss due to lower consumption is P4.5 trillion. Meanwhile, the loss in private investment and returns in the same period is around P21.3 trillion.
Chua also warned that the recovery of the country’s gross domestic product (GDP) would progress at a snail’s pace. “We expect the economy to converge to the pre-pandemic growth path by the tenth year.”
“While we will recover to the pre-pandemic level by the end of 2022 or early 2023, it will take several more years before we converge to our original growth path,” Chua added.
Another key finding of the study is that workers’ productivity will also be lower due to untimely death, illness, and lack of face-to-face schooling.
The impact of these on productivity is likely to be permanent over the next 40 years or the average number of years a person is expected to work in his or her lifetime, he said.
Based on the NEDA study, the resulting productivity loss in human capital investment and returns is estimated at P15.5 trillion for the next 40 years.
Of that amount, P4.5 trillion are losses due to premature deaths, and the loss in productivity from sicknesses and the inability to access treatment from other diseases and illnesses associated with recovery from COVID-19.
“Moreover, this also accounts for additional healthcare costs associated with these various diseases and sicknesses,” Chua said.
Meanwhile, the remaining P11 trillion represents the reduction in future wages and productivity, as a result of the suspension of face-to-face classes in school year 2020 to 2021, and the lost wages of parents who forgo or reduce work hours to accompany their children in online classes.
The loss in future wages is based on the impact of lower quality education from online and other types of distance learning during the pandemic.
According to the Asian Development Bank, every year of lost schooling leads to a 10 percent permanent decrease in future wages.
Using US data adjusted for Philippine education levels, NEDA estimated that the online and modular learning in the country is only 37 percent as effective as face-to-face learning.
While this tempers the full impact of total school closures, Chua said the prolonged use of distance learning will lead to lower future productivity and consequently lower wages.
“The one-year school closure cost the economy 230 billion pesos in 2020, and its impact over the next 40 years of the students’ lifetimes in the labor force is estimated at P10.7 trillion. This impact on productivity is likely to be permanent over the person’s lifetime,” Chua explained.
To address the impact of the COVID-19 pandemic and mitigate the long-term scarring effects on the economy and the people, Chua underscored the importance of the three pillar strategy.
This includes accelerating the vaccination program by expanding vaccination sites and leveraging new technologies, opening the economy safely through localized lockdowns and pilot face-to-face classes, and fully implementing the recovery program, especially the 2021 budget.
“Let us use this pandemic to get everyone to work more urgently to address the problems we have now. Our recommendations have not changed,” Chua said.
“We can still recover to pre-pandemic level by the end of 2022 or early 2023, with a growth rate of 4 to 5 percent this year, and 7 to 9 percent next year, if we do these three things,” he concluded.