Lessons from 2020
The year 2020 caught the world unprepared for a pandemic that forced many countries to try various strategies, including restricting mobility and closing borders, in a bid to contain the spread of the virus.
However, it came at a price—people lost their jobs and many families suffered from hunger. Governments responded by providing food subsidies that resulted in a higher budget deficit and debt. Private companies did their part by donating food, cash, and services to help the poor. Despite the unprecedented assistance, it was not enough to support the whole population affected by lockdowns and community quarantine. It is the people, after all, who drive the economy.
It was a lesson that we should remember as we welcome 2021. But the health crisis is not over, with a new Covid-19 strain that originated in the UK posing a more potent threat, according to reports. This means we should continue to sustain the health protocols that proved effective in containing the virus, such as wearing face masks and face shields outdoors, constant washing of hands, and social distancing.
We may need to continue these health protocols until most of our population receive the Covid-19 vaccines by the second half of 2021. Experts believe these vaccines will also be effective against the new virus strain first discovered in Europe, although it is too early to make a definitive conclusion.
Last year was an eye-opener for all of us. We should strengthen our health-care system and avoid closing the economy as much as possible. The National Economic and Development Authority has already warned that reverting back to the modified enhanced community quarantine could cost Metro Manila and its adjacent regions some P2.1 billion in wage losses a day.
Neda estimates the general community quarantine that was extended until January 31, 2021 already costs these regions around P700 million in daily wage losses. I agree with Neda. The losses and setbacks stress the need to work together to safely reopen the economy further in 2021.
Every week of ECQ/MECQ in the NCR and the adjacent regions, according to Neda, shaved off 0.28 percentage points from the gross domestic product growth in the second and third quarters, or around P2.1 billion in lost wages a day. Under the GCQ, the loss was lower at around P700 million.
Neda said a big part of forgone wages was caused by restricting children and family activities in the Philippines, which derives most of its growth from demographic dividend given its very young population. The country’s median age is 25, while 36 percent of the population is 18 years old or younger.
Acting Neda Director-General Karl Kendrick Chua says as “children are not allowed to go out of their homes, even to study, family activities are restricted, and thus a big part of the economy is not functional.” GDP growth in Q3 2020, if there were no such restrictions, could have been 4 percentage points better at -7.5 percent rather than the -11.5 percent recorded, he says.
I fully agree with Secretary Chua. The key to economic recovery is to continue managing risks, not avoiding them completely.
Recent trade indicators show we are on course to recovery. While merchandise trade contracted 12.6 percent in October from a year ago, the decline was a significant improvement from the 59.5-percent drop in April. The Department of Finance said the figures reflected “economic recovery as the country eased lockdown measures intended to curb the pandemic.”
If we continue the calibrated reopening of the economy, while observing the health protocols and administering an effective vaccination program nationwide, I believe merchandise trade may reach the positive territory in 2021.
Meanwhile, the United States and Europe—the territories most affected by the virus—already provided doses of Pfizer-BioNTech vaccines to millions of their people. We hope the Philippines will also secure an adequate supply of the vaccines this year, so we can make significant gains in our quest to achieve the so-called herd immunity from Covid-19.
Our government led by President Duterte is focusing on securing supply contracts with vaccine makers to make sure most of our people will be inoculated this year. President Duterte recently signed the P4.5-trillion government budget for 2021, which includes a P72.5-billion allocation for the vaccination program, seen as the best strategy out of this pandemic.
The 2021 budget, the highest on record, will also support our economic recovery, fund infrastructure projects, and continue to assist the most vulnerable members of our society.
This year gives us good reasons to be hopeful. We should also learn from the lessons of the past year, so we can adjust and adapt to the economic opportunities and challenges that 2021 brings.