Repeated lockdowns seen to slow economic recovery

MANILA, Philippines — The two-week reimposition of a stricter quarantine in Metro Manila and nearby provinces will slow down economic recovery as it further erodes the country’s fiscal position and exact a heavier toll on business activity, economists said.

President Duterte reverted the National Capital Region (NCR), Cavite, Laguna, Bulacan and Rizal provinces to the more severe modified enhanced community quarantine (MECQ) from Aug. 4 to 18.

This was in response to the plea of medical workers for a “time out” to slow down the transmission of the coronavirus and prevent the collapse of the health system.

ING Bank Manila senior economist Nicholas Mapa said while authorities may have had no choice but to hunker down anew and employ drastic measures to slow the spread of the virus, this will deliver another blow to efforts to revive the flailing economy.

Other than the disturbance to businesses that have just started to reopen and adjust their operations to adopt to the so-called “new normal,” Mapa said the government’s fiscal position would be hit as it would again have to extend  social protection to vulnerable sectors.

“Authorities must spend yet again to safeguard the lives of its citizens via cash aid and dole outs, negating any savings made by holding back on spending in the first half of the year,” he said via email.

“Repeated returns to lockdowns will eventually take its toll both on the economy and the fiscal position of the Philippines.”

Economic managers have repeatedly stressed prudence in fiscal response to the pandemic, citing the need to preserve resources to cope with what could be a prolonged public health crisis.

Mapa expressed concern, however, that in so doing, the country may have lost steam in the initial response.

“Calls for a fiscal bazooka were parried by authorities citing the need to preserve our ammunition for a drawn-out war. After being knocked back in the opening skirmish and routed in the first major battle, we may not be able to rally the troops quickly to victory after such a devastating defeat in 2020,” he said.

RCBC chief economist Michael Ricafort said industries that would be most affected by reduced mobility, as well as more stringent health protocols, stand to lose about four percent of their annual income as a result of the reimposition of MECQ.

“The latest shift to MECQ from GCQ would fundamentally reduce business or economic activities amid more stringent health protocols to prevent the further spread of COVID-19,” he said.

“The hardest-hit businesses, industries, and sectors would forego about four percent of their yearly income as a result of the two–week MECQ.”

Listed companies whose operations are affected by the tightening of quarantine restrictions may delay investment plans.

“This may also slow economic recovery prospects and some investment valuations, as well especially for some adversely affected listed companies or other investments.” said Ricafort.

These negative effects to the economy, he said, may be offset by further monetary easing measures, the passage of several economic stimulus bills, as well as increased infrastructure spending.

The National Economic and Development Authority (NEDA) declined to provide an assessment on the impact of the two-week reimposition of the MECQ on several of the country’s growth centers as of yesterday, saying it is conducting technical analysis.