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Lessons from Covid-19 pandemic economic debacle

Summary:
> Fact check in the Philippines shows the following…
> DBCC forecasts PH GDP is expected to shrink by 8.5 percent to 9.5 percent this year
> Lackluster economic performance reflects the underdeveloped structure of the service economy of the country.
> The education sector has some data showing what the impact of poor digitalization and communication is on this sector that is already reeling from the pandemic.

Lessons from Covid-19 pandemic economic debacle
Henry Chan
December 13, 2020

The economic managers of the Philippines in the Development Budget and Coordination Committee projected on Dec. 3, 2020 that the Covid-19 impact in 2020 will mark the worst annual economic contraction of the country in the post-war era as a result of lengthy coronavirus lockdowns.

The gross domestic product (GDP) is expected to shrink by 8.5 percent to 9.5 percent this year, eclipsing the 7.0-percent annual contraction recorded in 1984 and worse than the committee projection of 4.4 percent to 6.6 percent shrinkage in July.

by IDSI

The economy shrank around 10 percent from January to September, pulled down by continuing restrictions in major economic centers as coronavirus cases soared. The latest forecast figured in some rebound of economic activities in the last quarter of the year as infection moderated from the August second wave peak.

The country’s total infected cases are approaching 450,000 and the death toll is exceeding 8,700 as of December 9. The restriction place on mobility has stopped the third wave that many Northern Hemisphere countries experienced recently with the drop of temperature. The tapering-off speed in the second wave, however, remains slow, and a prolonged social mobility restriction will likely stay until widespread vaccination can reach a significant percentage of the population in the second quarter or third quarter of 2021.

Relative to other Asean countries, the country’s economy suffered more significant damage from the Covid-19 hit. The three other countries most hurt by the Covid-19 pandemic — Malaysia, Singapore and Thailand — are projected to suffer around 6 percent drop of GDP. For Indonesia, the country with the most number of Covid-19 cases in Southeast Asia at close to 600,000 and mortality more than double that of the Philippines on December 9, its economy is projected to shrink 2 percent this year.

There are many factors behind the divergence of the economic performance of different Asean countries in the pandemic. Looking at some probable cause of the country’s subpar attainment could be helpful when the government embarks on post-pandemic economic reconstruction.

A key reason behind the lackluster economic performance reflects the underdeveloped structure of the service economy of the country. As close to 60 percent of the economy is in the service sector, the social mobility restriction cut off the traditional means of continuing the economic activities of this crucial sector and collapsed the economy. The service sector in the country is made up mostly of low value-added service activities that rely mainly on human-to-human contact as the means of economic activity generation. The poor state of digitalization of the economy and weak communication links prevent their migration to work-from-home (WFH) arrangement that preserves jobs and income in many other countries during the pandemic.

The education sector has some data showing what the impact of poor digitalization and communication is on this sector that is already reeling from the pandemic. Data from the Department of Education (DepEd) indicated that as many as three million primary and secondary level students or more than 10 percent this year missed enrolment when the school started on October 5.

The department reported that 87 percent of more than 22 million public school learners are using self-learning modules (SLMs) this year and the department admitted that the use of SLMs should be supplemented by video streaming to achieve the ideal education outcome. But the chairman of the Senate Committee on Basic Education, Senator Gatchalian, pointed out that the DepEd TV episodes online at YouTube channel only has around 59,000 subscribers, a figure that is one million behind the ideal target. In the Facebook Live videos, 30 percent of the expected viewers were not able to watch the lessons because of unstable internet connection.

Another key reason behind the subpar economic performance under Covid-19 is the concentration of economic activities at Metro Manila. The metropolis has a land area of 620 square kilometres (0.2 percent of the country) and an estimated population of 12 to 15 million (around 13 to 15 percent of the country). The GDP is estimated to account for 37.5 percent of the country and mostly in service. The concentration of the nation’s economic activities in the metropolis is very high, and any mobility disruption will hurt the country significantly.

The Covid-19 pandemic has revealed many cracks in different countries’ social and economic foundations. A country’s response to the post-pandemic reconstruction is going to be a test of the country’s resiliency, and the state’s capacity to reform. Though the government is going to focus on immediate vaccination and reopening of the economy, the weakness revealed by the pandemic should be kept in mind. A prominent feature of the 21st century is the recurrence of “black swan” events ranging from the 2008 global financial meltdown to the emergence of Covid-19 — they are unpredictable, and the only way to mitigate their impact is a resilient social and economic structure anchored by a capable state capacity.

Dr. Henry Chan is an internationally recognized development economist based in Singapore. He is also a senior visiting research fellow at the Cambodia Institute for Cooperation and Peace and adjunct research fellow at the Integrated Development Studies Institute (IDSI). His primary research interest includes global economic development, Asean-China relations and the Fourth Industrial Revolution.

New Worlds by IDSI (Integrated Development Studies Institute) aims to present frameworks based on a balance of economic theory, historical realities, ground success in real business and communities and attempt for common good, culture and spirituality. We welcome logical feedback and possibly working together with compatible frameworks (idsicenter@gmail.com).

**Also published in: https://www.manilatimes.net/2020/12/13/op-ed-columns/lessons-from-covid-19-pandemic-economic-debacle/809355/

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