Economy seen held back by ‘excessive risk aversion' as PH posts worst contraction


Posted at Jan 28 2021 05:31 PM

Economy seen held back by ‘excessive risk aversion' as PH posts worst contraction 1
Jeepney drivers ask for aid along A. Mabini Street in Caloocan City on June 25, 2020, amid the general community quarantine. Many jeepney drivers resorted to begging as they were disallowed from plying their routes due to quarantine restrictions. Mark Demayo, ABS-CBN News

MANILA - After the Philippine economy posted its worst post-war contraction, economic managers on Thursday said the economy was weighed down by lockdowns and that “prolonging the status quo of community quarantine and risk aversion is not an option.”

In a statement delivered by Socioeconomic Planning Secretary Karl Chua, the Duterte administration’s economic managers said “the economy is strong enough to recover if we enable it to do so.”

“In 2020, we saw significant hardships among the people who were deprived of jobs and income that led to more hunger, more poor people, higher prevalence of other sicknesses, far more deaths from non-COVID reasons, and lost opportunities,” Chua said.

Quarantine restrictions reduced household spending by P801 billion in 2020 or an average of around P2.2 billion per day, Chua said.

The fall in consumption translates into a total income loss of around P1.04 trillion in 2020 or an average of around P2.8 billion per day, he added.

Chua pointed out that private consumption, which comprises some 70 percent of GDP, remained weak as restrictions on the mobility of children, and hence families, prevented private consumption from making a stronger comeback.

“Economic growth will be hard pressed to make a stronger recovery if children and families are restricted from participating in the economy, as up to 50 percent of non-essential retail sales are driven by family spending.”

Last week, the inter-agency task force leading the country’s pandemic response announced that minors aged 10 to 14 would be allowed to go out of their homes in areas under modified general community quarantine or MGCQ.

President Rodrigo Duterte however took this back a few days later saying he was compelled to reimpose the restrictions on minors due to the detection of the new COVID-19 variant in upland northern Luzon.

Chua meanwhile acknowledged that easing quarantine restrictions have been complicated by the emergence of new COVID-19 variants, but said economic managers expect the government will have rolled out enough vaccines against COVID-19 for a majority of Filipinos before the end of 2021.

Economic managers expect GDP to grow by 6.5 to 7.5 percent in 2021 and by 8 to 10 percent in 2022.