A word on 2020, a wish for 2021
I have run out of words to describe 2020 — sweeping the globe is a pandemic which actuaries consider a one-in-forty-year event, but is actually the fourth in the last 16 years. People found themselves locked in their homes overnight, at first for a few weeks, then a few months with no end in sight. Our once booming economy is in deep recession, with year-end contraction projected to be up to 9.5 percent and recovery forecast to be the slowest among peers. A World Bank survey of businesses at the start of Q3, with 74,000 respondents, showed that 15 percent had permanently closed down, 40 percent had temporarily suspended operations, and close to half had laid off workers. The latest SWS surveys showed that 48 percent of families now consider themselves poor from the record low 38 percent in March 2019, and hunger is at a record 21.1 percent for the year.
Yet despite the gloomy numbers, we found rays of light over the past year. One of them is the private sector, which has come through with flying colors with the massive efforts undertaken to help with pandemic response. Field hospitals, COVID-19 wings, quarantine facilities and test laboratories were built and equipped overnight, millions of PPEs were sourced and donated, housing was provided for health care workers by schools and other institutions, and at least one university even opened its doors to the homeless who had nowhere to go. Landlords deferred or outright waived lease payments, financial institutions waived interest, and utilities and credit card companies deferred payments. Many companies continued to pay or give subsidies to employees and even casual workers while nonoperational.
While companies in other countries did the same, the cost of such was usually borne by their governments through subsidies and payments. Here, these costs were borne by the private sector.
We also saw companies retooling their production lines to manufacture what was needed—an electronics firm producing ventilators, a distillery producing alcohol for sanitizing, clothing manufacturers shifting to producing PPEs.
And corporate social responsibility programs were stepped up as companies provided food, clothing and shelter to communities devastated by the pandemic and natural calamities.
As a UNDP rep said at an MBC webinar, he had never seen the private sector involved to the extent he has here in the Philippines. Of course, the government also did its part in building facilities and providing aid, but the fact that the private sector can move much more quickly was invaluable, particularly in the early months of the pandemic.
Another ray of light has been the surprising resilience of the twin engines of the economy: the BPO sector and OFW remittances. BPO revenues are expected to hold despite being hampered by employees working from home, while OFW remittances have declined only slightly.
While the pandemic has brought a lot of pain, it has also accelerated the shift to digitalization, with online commerce growing sharply and new businesses and business models springing up.
One in three Filipinos used an online service for the first time during this pandemic, and 94 percent say they intend to continue using it even after the pandemic. Businesses have found ways to do online what they thought required physical presence, such as turning over a condominium unit to buyers, medical consultations, selling life insurance, etc. From crises spring innovations, and thankfully we saw that here.
As we close the book on 2020, what do we have to look forward to in 2021? Will the economy fare any better?
From such a low base, growth is expected to rebound with projections of 5-6 percent growth from most analysts. However, there are downside risks.
Domestic consumption comprises 70 percent of GDP, and business and consumer confidence remain low. Witness the empty restaurants and tourist spots, and the continuing hesitation of people to go out and spend. Businesses continue to hold back on investments, and government spending has been lackluster. It is difficult to see these trends reverse in the next two quarters. Added to this is the risk to OFW remittances as countries lock down repeatedly.
We all agree it is important to reopen the economy, but people need to believe it is safe for them personally. So my new year’s wish for all—have a vaccinated new year!
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Rizalina “Riza” G. Mantaring is a trustee of the Makati Business Club and former country head of Sun Life Financial Philippines.
Business Matters is a project of the Makati Business Club ([email protected]).
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