Prioritize the poor

One tragic consequence of the economic crunch caused by the COVID-19 pandemic is that the poor and those barely above the poverty line are and will be most affected. The World Bank has estimated that the health crisis will make 2.7 million more Filipinos poor this year as a result of a record decline in the Philippines’ economic output as measured by the gross domestic product (GDP).

The multilateral agency expects Philippine GDP to shrink by 8.1 percent in 2020, worse than the existing Philippine record of a 7-percent contraction in 1984 when the Marcos dictatorship was wracked by a debt crisis in the wake of the Ninoy Aquino assassination. In the nine months to September this year, GDP had declined by 10 percent.

As employment is linked to the level of economic activity, a slowdown results in job losses as companies lay off workers to cut costs. Add to this the thousands of overseas Filipino workers (OFWs) who lost employment as the COVID-19 wreaked havoc on economies across the globe. As such, the World Bank expects nearly three million Filipinos to fall below its poverty line of $3.2 a day (about P160 per person per day) as job losses locally and lesser cash remittances from OFWs make life more difficult for Filipino families.

The poor and vulnerable sectors of society are especially likely to experience significant welfare losses because of their limited capacity to manage risks, according to the World Bank. These sectors have no money or investments to fall back on when economic difficulties arise. Those in the middle-income class may still have some savings to tide them over the current crisis. The rich have no problem coping. But the lower-income population? A household survey conducted by the World Bank last August already showed that 88.6 percent of Filipino families “expressed concern over their finances” during this pandemic.

Results of a Social Weather Stations (SWS) survey last September reflected this grim reality. Of the 1,249 adult Filipinos surveyed from Sept. 17 to 20, 30.7 percent of them said they experienced “hunger due to lack of food to eat,” higher than the 20.9 percent recorded in July. This translated to some 7.6 million Filipino households experiencing involuntary hunger, the highest hunger incidence since 2014. Worse, 2.2 million families experienced “severe hunger,” the highest number on record. The SWS noted that the numbers have been rising since May, at the height of the strictest lockdown in the region that halted two-thirds of the Philippine economy from the middle of March.

Only when the threat of the COVID-19 pandemic eases and business activities slowly return to normal will economic recovery contribute to poverty reduction. The World Bank sees the poverty rate falling to its 2018 level in 2021, and continue improving throughout 2022 as the country’s GDP expands by a projected 5.9 percent next year and 6 percent in 2022. These forecasts are anchored on expectations that consumer demand will pick up alongside government spending, with an added boost coming from election-related spending starting mid-2021 ahead of the 2022 presidential election.

Economic managers have also noted that the Philippines would still stay under less restrictive quarantine during the first few months of 2021 and could open the economy fully only by the time the vaccination level reaches 60 percent of the population, which is expected to be by the end of next year. But what if no vaccine becomes available next year? Then the economic hardships will linger. The World Bank, in fact, did not take into account in its near-term growth forecasts the timing of vaccine availability. If the vaccine is rolled out next year, it will be an upside to its projection. However, it warned that a possible resurgence of COVID-19 cases is the most significant downside risk to the country’s growth outlook.

While it is true that government and private economists here and abroad are quite bullish about the economy recovering its footing starting in 2021, the day-to-day impact of the economic squeeze on the poor is something that both the government and the private sector need to attend to urgently and firmly. Failing to address the appalling levels of hunger and poverty across the country carries grave social consequences an already battered nation can ill-afford.

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