First of two parts
The world is under siege in real terms similar to the American thriller film “Contagion” that was shown almost a decade ago that depicts the rapid spread of a virus. The film was inspired by pandemics such as the 2002-2004 severe acute respiratory syndrome and 2009 flu pandemic.
In my lifetime, I have seen self-inflicted crisis after crisis, the afflictions of epidemics, flooded cities, burned forestlands, droughts and damaging climate disasters — and the last global economic crisis was the 2008-2009 financial crisis.
History professor Adam Tooze, director of the European Institute at Columbia University who is working on a history of the climate crisis, in his article titled “Is the Coronavirus Crash Worse than the 2008 Financial Crisis?” in Foreign Policy magazine called the last global economic crisis “a financial heart attack and this might be a full-body seizure.”
With over 850,000 infections and 40,000 deaths affecting 202 countries and territories, according to Worldometers as of April 1, 2020 (3:00 GMT), the coronavirus disease 2019 (Covid-19) has stunned the world.
This pandemic delivers widespread devastation in magnitude and proportion.
A global economic recession in the making
The pandemic is pushing the world economy to its worst global recession.
Financial markets suffered losses unseen since the 2008-2009 financial crisis. Governments and policymakers slashed interest rates. Airline and tourism industries heavily battered.
Quarantined consumers. Broken supply chains. Suspended transport systems. Paralyzed businesses.
United Nations Secretary-General Antonio Guterres warned that a global recession — perhaps of record dimensions — was a near certainty.
International Monetary Fund Managing Director Kristalina Georgieva said that it is clear that we have entered a global recession that will be worse than in the 2008-2009 financial crisis.
Many economies will fall into recession, according to Organization for Economic Cooperation and Development Secretary-General Angel Gurría.
Three-quarters of economists – 31 out of 41 – polled by Reuters from March 16 to 19, 2020 agreed the global economy is already in a recession. Reuters reported that economists have repeatedly cut their growth outlook over the past month and have increased their forecast probabilities for recession in most major economies.
Standard and Poor’s marked down global growth this year to just 0.4 percent. The dire 0.4-percent forecast would be a level the world hasn’t seen since the economic crash of 1982, when global growth was calculated at 0.43 percent, at the time the worst financial downturn since the Great Depression of 1929-1933, the research note added.
“The hit to global growth is imminent, with a global recession possibly on the horizon,” according to the National Economic and Development Authority (NEDA) report titled “Analysis on the Economic impact of Covid-2019” on Mar. 19, 2020.
Will the Philippines go into a recession?
The imminent threat of the spread of Covid-19 caused most regions – from Luzon to Mindanao – to adopt community quarantine where everyone were encouraged to stay at home and practice social distancing.
Curfews were imposed. All modes of transportation — land, air and sea — were suspended. Most companies shut down. Workforce from non-essential industries were advised to work from home.
Only establishments providing basic necessities, such as food markets, drug stores, and banks, among others, were allowed to operate. Hospitals remained open 24/7 to accommodate patients needing urgent medical care.
Malls and shopping centers were closed. Public transportation systems were halted. Local and international flights both inbound and outbound were suspended. Public gatherings and events were strongly discouraged.
The enhanced community quarantine (EQC) — where half of the population is under some form of restriction — reduced domestic economic activity especially in Luzon, which accounts for about 70 percent of the country’s gross domestic product (GDP).
Aviation, tourism, trade and remittances are most affected where the country expects to lose billions of revenues.
The Philippine economy have to stop momentarily.
In early February 2020, when the number of confirmed cases in the Philippines was only just two with one death — a timely opportunity to declare a community quarantine — a study titled “Economic vulnerabilities to health pandemics: which countries are most vulnerable to the impact of coronavirus” of the Overseas Development Institute identified the Philippines as one of the most vulnerable countries to the coronavirus disease due to its exposure to China and, at the same time, the least well-placed to address its impacts.
The NEDA report mentioned earlier highlighted the impacts on travel and tourism, exports, remittances, and consumption.
On travel and tourism, with travel restrictions on China and its administrative regions, i.e., Hong Kong and Macau – Chinese tourists being the second largest number of foreign tourists to the in 2019, next only to South Korea — the loss will result to a gross value added of P77.5 to 156.9 billion, equivalent to 0.4 to 0.8 percent of GDP in 2020.
Furthermore, the slowdown may reduce employment by 33,800 to 56,600 people.
On exports, with China being the country’s single largest trading partner comprising one fifth of the Philippines’ total trade, the estimated loss will be a gross value added of P4.9 to 9.8 billion, equivalent to 0.02 to 0.05 percent of GDP in 2020 and an employment loss of 3,000 to 6,700.
On remittances, impact will result in a loss of gross value added of P3.9 to 8.5 billion, equivalent to 0.02 to 0.04 percent of GDP and local employment loss of 1,700 to 4,500.
On consumption, as consumer confidence dips due to health concerns and social distancing measures, impact could result in a loss of gross value added of P45 to P94 billion, equivalent to 0.2 to 0.5 percent of GDP and reduce employment by 16,500 to 62,500.
These impacts alone could result in a loss of gross value added of P131.30 to P269.20 billion, and local employment loss of 55,000 to 130,300.
The EQC over Luzon for one month, based on NEDA’s estimates, could result in a loss of gross value added of P298 billion to P1.10 trillion, equivalent to 1.5 to 5.3 percent of GDP, and expected to reduce employment by 61,000 to 1 million.
The NEDA report, in summary, “expected a cumulative loss of P28.7 to P1,355.6 billion in gross value added, equivalent to 2.1 to 6.6 percent of nominal GDP in 2020. Without any mitigating measures, this would imply a reduction in the Philippine’s real GDP growth to -0.6 to 4.3 percent in 2020.” The total local employment loss could be 116,000 to 1,130,300 persons.
The coronavirus pandemic makes the Philippines vulnerable to face an economic slowdown. In an interview last March 29, Bangko Sentral ng Pilipinas Governor Benjamin Diokno, while admitting that the economy could go into recession this year, said the Philippines “will do everything” to avoid an economic recession.
While the pandemic will not only have long-lasting socioeconomic effects, its lessons will also lead to a more fundamental change such as creating economic recovery plans that are climate-friendly. Business-as-usual is the old norm. Economic resilience requires governments, businesses and societies to do things differently.
To be continued
The author is the executive director of the Young Environmental Forum. He completed his climate change and development course at the University of East Anglia (United Kingdom) and executive program on sustainability leadership at Yale University (USA). He can be emailed at email@example.com.