OF SUBSTANCE AND SPIRIT Diwa C. Guinigundo We were pleasantly surprised to hear the announcement by the Philippine Statistics Authority last Tuesday that the Philippine economy expanded by 11.8 percent during the second quarter 2021, coming strongly from first quarter contraction of 3.9 percent and year ago’s 17.0 percent decline. While this performance undoubtedly derives from “better balance between addressing COVID-19 and the need to restore jobs and incomes of the people,” base effects were definitely material. Last year’s drop was the deepest in decades and any climb out of it would definitely be positive. Several growth components showed fiery performance like total investment rising by 75.5 percent. Both public and private construction projects leap- frogged despite the quarantine and indeed they must have thrived because the streets were practically empty of both pedestrians and motor vehicles last year. What we would caution about is the unevenness of growth. Household spending was rather modest at 7.2 percent while government expenditure actually dropped by 4.9 percent. Industry-wise, agriculture shrank by 0.1 percent. The challenge is for the Philippine economy to fire on all cylinders. Is this possible? More than a year ago, economist Eran Yashiv of both the Tel Aviv University and London School of Economics captured our dilemma in the time of the coronavirus, thus: “Countries are facing stark and terrible choices now. End the lockdown to restart their economies but risk the ravages of the COVID-19 pandemic, or prolong the lockdown and inflict more heavy damage on people’s lives and on the economy. Large-scale testing is unfeasible in some of the most affected countries and antibody testing to detect immunity is struggling with reliability issues. That makes it difficult to identify the subpopulations that can be allowed out of the lockdown and to determine how long others need to remain sequestered.” Our own assessment is that our health situation in the Philippines has not changed much after one year and a half into the pandemic. Our health capacity could have improved in the last few months but the Delta variant emasculated  it in July and August. The US, Israel, Indonesia and many other jurisdictions are now considering a more appropriate level of herd immunity goal to aspire for. Some 70 percent of the population used to be the gold standard but the awesome velocity of Delta variant may require a booster vaccine, lest more potent mutation is enabled. This means moving away from the policy of giving the vaccines only to the adult population. More minors are getting sick, leading to a more overwhelmed hospital capacity. This translates into additional vaccines for 12-14 million young Filipinos. The Philippines has crossed the line from “moderate risk” to “high risk.” Daily cases are rising across all age groups. Some 13 of our 17 regions have reported Delta variant cases. We are therefore left with little choice between life and jobs; our health capacity continues to be severely hamstrung by unfavorable logistics. With our vaccination and contact tracing information still to be collected in a national digital warehouse, granular lockdowns are impossible to minimize the impact on business activities. The claim that “managing risks, instead of shutting down large segments of the economy, stands a far better chance of improving both economic and health outcomes” may sound vacuous because we actually wasted time deciding whether to impose travel restrictions. We were actually not mindful of the need to start procurement early. Our testing, tracing, quarantining and treating capabilities were slim. We can even argue that if our health authorities managed the pandemic well, we could have localized lockdowns and rebuilt the economy, better and faster. There would have been less blunder last year and more sustainable growth this year. In this context, the three-pillar strategy of the government needs strong caveat. Accelerating the vaccination program should really be primordial. Two balls in the air should be handled with dispatch namely vaccines availability and their administration. It was cited that a total of 38.6 million doses have arrived as of August 8, 2021. Another 148 million doses are expected for the rest of 2021. If we Include the minors among the qualified recipients of the vaccines and target a higher herd immunity, we need more doses and a bigger budget. At a daily rollout speed of 700,000, the timetable could slide forward to 2022. Safe reopening of the economy is a big hurdle given the Delta variant. Enforcement of public health protocols could be very challenging because the rules vary from one locality to another. Tracing needs to be more systematic to allow for less general lockdown and ensure safe reopening. Pursuing policy reforms is definitely plus for economic recovery. Part of ensuring a rebound is to extend the ayuda to affected sectors including those who were dislocated by the pandemic. We should ensure all local government units (LGUs) get the aid from the national government without exception and distribute it to their constituencies. Politics should be set aside. Only LGUs have the capacity to do it at grassroots level to ensure effective social protection. All up, it was correct for the economic managers to talk about speed bumps due to the ECQ in Metro Manila and other regions. The vicious cycle of these alphabet quarantines would simply roll over if we foul up on pandemic management. Growth is the innocent victim.