As the coronavirus infection rate escalates due to the absence of a coronavirus vaccine, the Philippines enters into an economic recession after the economic growth plunged to a new record low. We do know that the Philippines would enter into an economic slump due to the extension of the economic shutdown but what we do not know is the extent of the economic meltdown. Although the economic output as measured by the Gross Domestic Product (GDP) of -0.7% in 1Q20 was more than expected, the -16.5% in 2Q20 was worse than expected. The government tried to change the narrative by saying that despite the high inflation in 2018, delayed budget in 2019 and global pandemic in 2020, the Philippines have strong economic fundamentals as compared to the 1983 debt default, 1997 financial crisis and 2008 global recession. These infamous economic downturns pushed the Philippines on the verge of economic collapse and forced the government to take the lead to soften the hard impact of economic crash. Multidecade of countercyclical regulatory measures such as aggressive fiscal and accommodative monetary policies resulted to stable interest rates, positive credit rating, strong local currency, sound external sector and robust banking industry. But these economic gains could turn into economic pains as the pandemic thrashed most economic activities. The government stated that GDP projections had been reduced to -5.5% from -3.4% for 2020 and to 6.5% from 8.0% for 2021 to factor in the economic slowdown but we are not sure whether the Philippines could enter into a V-shaped economic recovery. Underemployment and unemployment rates worsened due to the enhanced community quarantine which restricted the movement of the population in response to the health protocols. Although the underemployment rate of 18.9% is below the recent high of 19.6%, the unemployment rate of 17.7% is above the recent high of 14.4%. The economic unrest could last longer than expected as millions went underemployed and unemployed. Even the employed were not spared as the government recommended to the private sector to implement pandemic-driven work arrangements such as work from home and work hours reduction. The government could not turn the economy around unless the economic solution is commensurate to the economic problem. Without private consumption, gross investment and net exports, government spending is the one that should take the wheel and steer. We do not have to be an economist to understand the bear case equation: no income + no spending = no growth.
