"The losses and setbacks in MECQ and GCQ point to the need to work together to safely reopen the economy further in 2021."
"The losses and setbacks in MECQ and GCQ point to the need to work together to safely reopen the economy further in 2021."
A strict lockdown or what is called a Modified Enhanced Community Quarantine (MECQ) could cost NCR and its adjacent regions some P2.1 billion in wages a day.
MECQ was imposed in Metro Manila, Laguna and Cebu City from May 16 to May 31, 2020. Under MECQ, essential industries allowed under ECQ are also allowed, including health care, pharmacies, veterinary clinics, food manufacturing and supply chains, and groceries. Certain manufacturing and processing plants can operate, at 50 percent capacity. Government offices also resume work at 50 percent capacity. Transportation is allowed but only for essential work and services.
On the other hand, just a slight loosening, or what is called a General Community Quarantine (GCQ) costs these regions around P700 million pesos in wages, according to estimates of the National Economic and Development Authority (NEDA).
Under a Modified GCQ, people are allowed to leave their homes but only to obtain essential goods. Workers can go to work, but only those workers who are what are called “essential industries.” Public transportation is allowed but health protocols must be observed.
In GCQ, people are allowed to move around for work and essential services but only if their barangays show no coronavirus cases. To ensure compliance, checkpoints are installed.
The losses and setbacks in MECQ and GCQ point to the need to work together to safely reopen the economy further in 2021, the National Economic and Development Authority said.
From March 15, 2020 to the present, the government has imposed a series of strict community quarantines to help save lives from COVID-19, while building up the health system capacity.
In three of the 10 months of lockdowns in 2020, the stricter ECQ/MECQ effectively shut down around 75 percent of the economy, resulting in huge losses in jobs and income, according to NEDA.
“Based on the second and third quarter GDP numbers, NEDA estimates that every week of ECQ/MECQ in NCR and its adjacent regions alone shaves off 0.28 percentage points from GDP growth. This is equivalent to around P2.1 billion in lost wages a day. The amount during GCQ is lower at around P700 million a day, but this amount is still significant enough to bring hardship to many people,” according to Acting Socioeconomic Planning Secretary Karl Kendrick Chua.
“When we restricted the economy in the second quarter, GDP fell by 16.9 percent and the unemployment rate increased to 17.7 percent. On the other hand, when we further relaxed the quarantine in the second semester, GDP improved to -11.5 percent in the third quarter and the unemployment rate decreased to 8.7 percent in the fourth quarter. The combined effects of these were concretely felt by the people. According to the most recent Social Weather Stations (SWS) Survey, the hunger rate fell significantly to 15.7 percent in November from a record-high of 30.7 percent in September 2020. But we can still do better,” explained the NEDA Chief.
Chua said a big part of these forgone wages come from restricting children and family activities. “For years, the country’s strong growth has been supported by its demographic dividend, where the country’s young population forms a large part of the labor force, earning income and driving demand,” he said.
The Philippine median age is 25, and 36 percent of the population is 18 years old or younger. According to the 2018 family income and expenditure survey (FIES), families of at least three members account for around 90 percent of total non-essential spending.
Moreover, according to a 2019 study commissioned by a private firm and shared with NEDA, parents are the largest contributors to the P574 billion total informal eat-out market, which includes quick service restaurants. Parents account for around 48 percent of the spending, and is equivalent to P277 billion.
However, the community quarantines have restricted economic activity from children and families. In fact, non-essential spending contracted by 51 percent in the third quarter.
“Since 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. If there were no such restrictions, GDP growth in Q3 2020 could have been four percentage points better at -7.5 percent rather than the -11.5 percent recorded,” according to Chua.
Based on consultation with leading malls and fast-food chains, some 32 percent to 50 percent of their sales are driven by family consumption as opposed to individual or worker consumption. A leading fast-food chain estimates that food bought with kids and for kids comprise 43 of total sales. Similarly, prior to COVID-19, a shopping mall chain estimates that about 46 of foot traffic came from parents with children. This translates to families contributing almost half of total sales.
“All these mean that while we opened the supply side during GCQ and MGCQ by allowing establishments and public transport to operate at higher capacity, the demand side is still very limited given the continuous restrictions that prevent children, and hence families from going out,” says Chua.
“If we allow more consumption activities to resume, this will encourage firms to utilize excess capacity, which will eventually stimulate new investments to serve new demand,” he added.
“In 2021, the key to our recovery is to continue managing risks, not to avoid them completely. This way, we can bring back jobs and income sources to enable the far majority of people to also address their non-COVID-19 sicknesses and hunger. All economic indicators reveal that with the safe relaxation of community quarantines, incomes and jobs come back,” stressed Chua.
The NEDA chief also recognized the need to recalibrate strategies in response to the emergence of the new COVID-19 variant and implored the public to continue upholding the minimum health standards and to take the necessary precautions to prevent the transmission of the virus.
“The losses have been huge and a reversal to stricter community quarantines in 2021 is not an option. Businesses also need to make sure that there is proper ventilation in their business spaces. The public and private health sector needs to continue improving the health systems to include a vaccine roll-out. Finally, the government needs to facilitate the transition to the new, but better, normal,” said Chua.
“Our challenge is to make sure that our hard-fought gains in 2020 will not be reversed and the economic cost of 2020 will not repeat in 2021.”
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