[ANALYSIS] Duterte may yet survive the pandemic – at our expense

The “It’s the economy, stupid” quip, used during Bill Clinton’s successful 1992 presidential campaign against George Bush at a time that a recession hit the US, comes to mind when we take a look now at the Philippine economy. I’m afraid this quip won’t apply to Duterte in the time of the coronavirus pandemic.   

For the first quarter of January 2020, the Philippine economy contracted by 2% after several decades of growth. Prior to the coronavirus, Taal Volcano acted up in January, and that significantly contributed to the contraction. Most likely, the second quarter will likewise contract, as this was the period when the effects of the lockdown were felt and the social amelioration had yet to be released.

This will put the country in a technical recession or two successive quarters of negative growth. Even government estimates predict the economy to contract by 2.4% for 2020.

NEDA earlier warned that the Luzon-wide lockdown would have a major impact on the national economy as it contributes 73% to the country’s real GDP. With a national lockdown on major metropolis areas, easily 32 million Filipino workers are on forced holiday or will not work. Of around 2.7 million workers and 500,000 OFWs, out of 2.3 million are already out of jobs.

The Philippine economy lost in outputs P700 billion by March due to the quarantine efforts, and this could grow to P1.5 trillion in June. NEDA also pointed out foregone opportunities in terms of consumer spending and a significant drop in remittances, exports, and tourism.  

A trip to the ICU? Not quite

Given this grim economic scenario, will our economy go into intensive care because of COVID-19? The economic triage points to symptoms that don’t require intubation. Let me backtrack a little to retrace how this will not happen.

Dutertismo and COVID-19 are both viruses that exposed the weaknesses of our institutions and democracy itself. Duterte’s rise to national prominence was both viral and virulent. In less than 5  months after deciding to run for president in 2016, majority of Filipinos who hardly knew him voted to install him with the promise of virulence. 

The Davao mayor kept his promise and waged a bloody war on drugs while maintaining high popularity ratings. His landslide win in the midterm elections showed that democracy could be handily swayed to an extreme. And Duterte is not alone as populist authoritarian leaders took power in densely populated democracies like India and Brazil.

Duterte’s economic policies rode on the wave of economic growth started by President Benigno Aquino III (infrastructure spending, peace dividends) and belatedly under Gloria Arroyo (nautical highway, maritime reforms). Duterte’s policies centered on boosting consumption spending buoyed by high remittances, massive infrastructure spending, tourism, and gambling. 

Neoliberalism’s promise of low inflation while attaining high growth rates thrived under Duterte – with the country enjoying record-high credit ratings, gross international reserves and a stable peso, and favorable balance of payments – the so-called strong economic fundamentals.  

The economy was in full throttle, despite the humps of the 2018 inflation and the 2019 budget passage delay, riding on consumption-driven economic growth.

But an epidemiological virus erupted that radically changed the global landscape and unraveled neoliberalism’s market failures. 

Fiscal space

The COVID-19 pandemic literally x-rayed society, showing how widespread are the inequalities. But the pandemic has a disproportionate impact on vulnerable communities as they struggle to take on a prolonged health crisis with extremely limited resources.

Families who are already poor and vulnerable before the pandemic are now facing life-and-death situations about food, health care, and survival.  

There is a substantial increase in risk for vulnerable groups who lack income, work, shelter, and being discriminated by class, age, religion, gender identity, and expression. Social crimes like domestic violence and online sexual exploitation of children registered spikes during the pandemic. 

Going into the pandemic, the Duterte government had fiscal space that enabled it to borrow money immediately and viably float bonds. The recovery and stimulus package would go up to P2 trillion in the national budget if the economy could go back to its growth trajectory of 7%.

While this increased the country’s level of public debt, it is not serious enough to undermine fiscal sustainability. In short, there is no fiscal crisis that is forthcoming. 

Targeted measures

Among developing countries, the Philippines prior to the pandemic has put up tax-funded, targeted social protection measures like the conditional/unconditional cash transfers, social pension for the elderly, and assistance to individuals in crisis coursed through local governments.

This was expanded with the Bayanihan to Heal as One Act that almost had universal coverage for social amelioration and wage subsidies. But these systems are fragmented and have weak administrations susceptible to patronage and corruption. The pandemic now has put all these problems of social protection measures in the spotlight. 

Economists are pinning their hopes that when you’re down, there’s no way but up.

There are 3 growth cases – the V-shape, W-shape, and long U-shape recovery. The V-shape won’t happen, as there is still no vaccine. The W-shape is what will happen when we go into a forced recovery with no vaccine. The long-U-shaped recovery is to wait for the vaccine – but the Philippines is not going for that.

With Metro Manila and the rest of the country going into a relaxed quarantine, infections may rise again. The country’s delayed and problematic response to the COVID-19 is still felt 3 months after a national public health emergency was declared. From lack of mass testing and contact tracing, this is further exacerbated by data integrity issues raised against the Department of Health coronavirus tracking systems. (READ: Despite GCQ, Metro Manila still far from winning COVID-19 battle)

With global lockdowns easing up towards the last quarter of 2020, it is projected that overseas work would again be in demand. As global trade opens and rebounds, seafarers are redeployed and work in oil and petrochemicals need more workers and aggregate demand increases.

While remittances dropped during the lockdowns, this will again increase and can surpass previous highs. The bulk of remittances mostly come from the US, Europe, and Middle East. This will be complemented by an expanding business process-outsourcing sector (BPO) brought about by a shift to a digital economy.

Of course, China’s expansionary project will zoom in on the Philippines becoming its satellite province. The engine of mass consumption once again will restart unless drastic behavioral change happens. (READ: China-led AIIB approves $750-million loan for PH’s virus response)

Going into a post-lockdown phase after a 75-day business standstill can be a tripwire for a second wave of massive infections. With delays in mass testing and unorganized contact tracing systems for coronavirus infections, a swell in infections more massive than before can be economically disastrous.

Without the vaccine, everyone is not safe and we should not let our guard down. Meanwhile, Malacanang’s direction is opening the valves that closed the economy and not to wait for additional time needed to flatten the curve as experts are suggesting. 

Despite mobility issues and traffic chaos arising from physical distancing measures, government is pushing for a W-shape recovery strategy. The trade-off is clear – economy trumps public health. In  both scenarios, lives will be saved either from hunger or infection, ultimately leading to more deaths.

As a national policy, everyone should be treated as an essential worker and should not be a sacrificial lamb in the altar of economic trade-offs. – Rappler.com

Tom Villarin is former congressman of Akbayan Party List in the 17th Congress. He authored the law Institutionalizing the 4Ps and the Safe Spaces Act, co-authored the Universal Health Care Law, Expanded Maternity Leave Law, Free Tertiary Education in Public Schools, and the vetoed Anti-Contractualization Law, among others.