MACROECONOMIC PERFORMANCE OF THE COUNTRY DURING THE PANDEMIC AND ITS ISSUES

1. INTRODUCTION
For the past few years, the Philippine economy has seen constant growth and has since gained momentum.
Since the gaining of momentum, the country has experienced an increase in the Gross Domestic Product (GDP)
since 2016 with a whopping 7.15% and a 0.8% increase from 2016. Since then the country experienced a
tremendous increase in the GDP and a decreasing decline having a turnaround from its dismal performance for
the past decades on the boom and bust cycle that has left the Philippines left behind and outperformed by its
neighboring Asian countries. From being the “Sick man of Asia” to outperforming the neighboring countries.
The Philippines has a steadily growing economy, with the GDP reaching over 361.49 billion US dollars in 2020.
The country is one of the emerging markets and the 3 rd highest economy in Southeast Asia by Nominal GDP
following Thailand and Indonesia. The leading foreign investor of the Philippines in 2020 was the United States
with its investment amounting to approximately 35.4 billion pesos that were followed by China with the total
investment of 16 billion pesos. The prospect of the economy has garnered positive investment, credit, and
competitiveness ratings from foreign investors. As the economy is opening and opportunities for foreign investors
are increasing. The country is attracting foreign investors due to its good programs and organization. The country
also works with many US-based organizations to ease the international trade process. Some examples include
the Prime Millennium Challenge Corporation that works with many partner countries including the Philippines, to
identify the key risk and constraints to investment by analyzing nations’ public and private sectors. The
Philippines also has a history of establishing fruitful trade agreements. With them, one of the founding nations of
the World Trade Organization (WTO) in 1995 and has reaped the benefits of the Association of Southeast Asia
Nations (ASEAN) since 1967. Because of the successful trade agreements, it is attracting exporters from the
country. Japan is the nation’s largest trading partner. The country has relaxing Foreign Ownership Limitations as
per President Rodrigo Duterte. As the Constitution caps the foreign investment in key sectors at 40% and they
cannot operate in remote locations. The Monetary and Tax Incentives of the country have been boosted as The
Asia Development Bank (ADB) offers to finance businesses looking to invest in the Philippines. The country has
326 ecozones in which are composed of export processing zones, free trade, and certain industrial estates.
Ecozones are outside customs territory and can import goods free of customs duties. Some businesses can
avoid local taxes, duties on the event material, and industrial estates attracting foreign investors. Privatization is
the biggest development for international businesses in the country. President Duterte plans to move many
publicly funded companies into private sectors allowing the domestic businesses and investors to contribute to
the previously unavailable industries.

Source: Statistica Research Department

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The Philippines received its first investment trade ratings; Fitch Ratings was first followed by Moody’s Investors
Service and S&P Global in 2013. The country rose to prominence among the emerging-market darlings, foreign
direct investment was poured into the country. The growth was stalled when Rodrigo Duterte became the
President but the economy has remained optimistic. The growth was bolstered by strong economic foundations
and a globally competitive workforce. The country maintained an average annual growth rate of 6.4% between
2010 and 2019, up from 4.5% between 2000 and 2009. Poverty has fallen from 23.3% in 2015 to 16.6% in 2016.
But a global pandemic hit the country and stalled the upward trend in real wages and has negative implications
for poverty reduction. When the country has recorded its first COVID-19 case the country was placed in strict
community quarantine halting almost all the work. The strict community quarantine has negative consequences
for income, jobs, educations, food security, and businesses. The GDP decreased by 9.5% in 2020 becoming the
lowest level since World War II. It is the worst drop since recorded from 1947 and when the tightest lockdown
was implemented in the second quarter, the GDP fell as low as -16.9%. With the help of the New Industrial Policy
(NIP) the country was recovering from the drastic event. The Macroeconomic Performance of the Philippines was
slowly moving in a positive outlook. The paper has two sections: the first section will focus on the recent growth
performance of the economy. The second section will focus on the issues relating to the current economy and
government intervention or policies taken.
2. MACROECONOMIC PERFORMANCE
GROWTH PERFORMANCE

Figure 1: GDP growth for selected ASEAN countries

Macroeconomics Performance determines how well a country is doing in reaching the important objectives or key
targets of government policy. It is the improvement in the average real standard of living. It is measured by the
job opening, prices, trade, growth, development, efficiency, public service, the environment, and the inequality of
income and wealth. Despite the country posting over 6% average annual growth between 2010 and 2019, the
country was touted as the next Asian Tiger Economy. The rude awakening was when the country experienced
the first record of COVID patients that led to the strict lockdowns that halted the services and remittances-led
growth model. The Philippines’ economic growth faltered in 2020 when the country experiences one of the

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deepest contractions in the Association of Southeast Asian Nations (ASEAN). Due to the uncertain and weak
recovery of the country and its protracted lockdown and inability to shift to a more efficient containment strategy.

The Philippines Q2 GDP growth is the worse among major ASEAN economies
Source: Philippines Statistics Authority
The model that the country uses appears to be more vulnerable to the disease outbreak. It is built around the
mobility of the people, tourism, services, and remittances-fed growth that are all vulnerable to the strict
lockdowns and thus the consumer confidence decline drastically. Many businesses were forced to close as their
market are not confident and lockdowns are imposed to suppress the growing rate of COVID positive in the
country. But as they say, when a door closes a window will open. The country’s Business Process Outsourcing
(BPO) demonstrates some resilience despite its main market being heavily hit by the pandemic. It forces the
sector to upskill and adapt to the events to catch the emerging opportunities under the new normal. The growth
for the past few months was not felt because of the rampant lockdowns that undermine the success. Because of
it, we made the global headlines for implementing the World’s Longest Lockdown during the pandemic, yet still
failed to flatten the curve. As we enter another year a lockdown and alert levels were posted to inform the
Filipinos that the number of COVID positive was growing. With the rampant lockdowns, the growth performance
was halted as to when the economy was recovering, the surge of COVID positive increases making it hard to
continue the delayed projects and programs. Another reason was the delay of the vaccination rollout which was
initially hobbled by the implementation and supply issues and later be affected by the vaccine hesitancy because
of Fake News and False Information being posted online scaring the Filipinos to get vaccinated.

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Figure 2: Community quarantine regimes during the COVID-19 pandemic, Philippine National Capital Region
(NCR), March 2020 to June 2021
The Philippine Gross Domestic Product (GDP) posted a growth of 7.1% in the third quarter of 2021. The main
contributors to the growth with their corresponding increases: Wholesale and retail trade, repair of motor vehicles
and motorcycles, 6.4%; Manufacturing, 6.3%, and Construction, 16.8%. industry and Services posted a positive
growth of 7.9% and 8.2% respectively. While Agriculture, Forestry, and Fishing posted a contraction of -1.7% in
the third quarter of 2021.

Source: Philippine Statistics Authority

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The Philippine economy is forecast to remain on a steady path in 2021 and 2022 as acceleration in the
government vaccination program and an increased drop in the COVID-19 positive patients. The supplementation
to the Asian Development Outlook (ADO) 2021 says the Philippine economy will grow 5.1% in 2021 and 6.0% in
2022, up from the bank’s September forecast of 4.5% in 2021 and 5.5% in 2022. The growth momentum has
clearly picked up on the back of the government’s vigorous drive to vaccinate Filipinos against the COVID-19
virus.

Source: Department of Health COVID-19 Vaccination Dashboard

The public spending on infrastructure and continued vaccination of the population will help further accelerate its
recovery in 2022.

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 Sour
ce: The ASEAN Post
The inflation outlook for 2021 and 2022 is 4.4% and 3.7% because of the rising fuel prices. The vaccination
allowed the slow reopening of the country to accept tourists to visit it boost the consumer and the business
confidence.

There are more than 65% of the target for the vaccination that receives their vaccines against the COVID-19.
The ADB has been assisting the government in procuring the COVID-19 vaccines and has provided $425 million
in total financing. The loans have helped fund nearly half of the country’s vaccines supply purchases for 2021.
The public spending on the infrastructure will support the country’s economic growth as it seeks to boost the
investment on roads, bridges, and railways to fuel faster growth, especially in Metro Manila. The economy has
started to recover with a 3.7% year-on-year expansion for the first half of 2021, supported by public investment
and a recovery in the external environment. As the continued recovery and reform effort of the country, they are
getting back on track on their way from a lower-middle-income with a gross national income per capita of
US$3,420 in 2020 to an upper-middle-income country per capita income range of US$4,096 to $12,695 in the
short term. A more robust domestic activity bolstered by the great consumer and business confidence and the
public investment momentum. The recovery is expected to have an overall positive impact on the reduction of
poverty in the country.

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Figure 1: A partial world map showing time zones (Poulpy, 2012). The Philippines, circled in red, is well placed
to serve Japan, Australia and New Zealand. Serving US and European Customers requires later shifts.

The BPO industry in the Philippines has a positive outlook when the Pandemic happened. They have seized the
opportunity to expand and hire people to work for them. The implementation of the Work From Home setup
helped the industry to flourish. The contribution of BPO to the Philippine Economy is now second from the
remittances being brought to the country. The industry was oriented to the country’s colonial power, the USA,
which also serves Europe and nearer neighbors, Japan, New Zealand, and Australia. With the rise of digital
platforms that helped facilitate freelancing. There are an estimated 1.5 million Filipino freelance workers on these
platforms. The Philippines has the world’s largest concentration of call center workers, but India has the higher
BPO market. The Philippines takes on back-end work that is ripe for automation. The Tholons list of Top Super
Cities for Digital Innovation reflects that there is a well-established BPO industry rather than a culture of digital
innovation.

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Table 1: Top Super Cities for Digital Innovation according to Tholons (2019)
As the country imposed a nationwide lockdown, the BPO offices were greatly affected. During the periods of
Enhanced Community Quarantine, several BPO offices were allowed to remain open, demonstrating its
importance to the country, economy, and geopolitical interests. Some sought to facilitate home working, shipping
IT equipment to the worker’s homes. Other businesses provided an on-site accommodation to allow workers with
quarantining family members. COVID-19 could therefore accelerate the de-globalization of work combined with
the expansion of automation and AI in multiple sectors that COVID-19 responds.

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Table 2: Projected Growth Rate of BPO sectors from 2019-2022
Indeed, the most recent data from the Philippine Statistics Authority's National Income Accounts show that,
despite the ongoing pandemic, "Information and Communication" (where the BPO industry is classified) has
consistently exhibited positive growth rates from the first quarter of 2020 to the first quarter of 2021. It achieved
+4.7 percent in Q1-2020, +10.7% in Q2-2020, +3.0% in Q3-2020, +1.9 percent in Q4-2020, and +6.3 percent in
Q1-2021.

3. ISSUES RELATING TO THE ECONOMY AND GOVERNMENT INTERVENTION OR POLICIES

COVID-19 is not only a global pandemic and public health crisis but also severely affected the economy and
financial market. Significant impact on the economy has already occurred across the globe due to the reduced
productivity, loss of life, business closures, trade disruption, and decimation of the tourism industry. As there is
little to no information about the epidemic making it is hard for the government to come up with solutions,
interventions, or policies to stop the spread. With the COVID-19 being threat to the economy and an increased
rate of COVID positive patients. In the Philippines, the Economic Impact on the communities is seen because it
has a heavy toll on the rural livelihoods. The loss of income and job opportunities were overreaching to the poor
communities in the Philippines.
Due to many places being disaster-prone they have difficulties in coping with COVID-19 restriction and its severe
impact on economic impact. The lack of income opportunities and the reduction of pay were pre-existing
challenges but had worsened significantly due to the pandemic. Communities reported continued insufficient food
supply and health, sanitation, and nutrition issues. The situation got worse when the job and income loss
increase and the communities are at high risk of poverty.

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Source: Philippine Statistics Authority
In August 2020, job losses were severe particularly in the construction sector by 56% and public transportation
by 52%. But by April 2021, the situation improved, and saw the biggest improvement was in retail the job losses
decreased by 13% but the job losses in construction and transport drivers are still affected.

As the COVID-19 become more widespread in the country, hunger and financial hardship are also experienced.
The unemployment rates reached the highest level since the Great Depression in April. It resulted in the claims

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of the unemployment benefits increased dramatically. There are millions of Filipinos who are unable to pay or
have trouble in applying to the benefits that led to frustration as hunger and malnutrition are also surging high.

As Hungers was higher in Mindanao by 20.7%, followed by Visayas by 16.3%, in Luzon by 15.7%, and in Metro
Manila by 14.7%. There are 24% job or income lost due to COVID. They are experienced by people ages from
18 to 24 as well

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As job loss increases they also experience economic hardships and the government is also having a hard time
coming up with a solution to the unexpected events that have occurred. With the impact of the COVID-19 on the
Tourism Industry of the Philippines given the travel restrictions and closure of the businesses, they expected to
lose over 50% of the 2020 revenue that also has affected the economy. With that, the increased poverty rate,
income losses, inflation, hunger, and malnutrition contributed to the economic loss of the country.

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The local government responses for COVID-19 management in the Philippines with the Strict Quarantines and
Lockdowns, Food and Money Support and Strict Health Protocols like quarantining in Hotels. Through its Inter-
Agency Task Force on Emerging Infectious Diseases, the Philippine national government outlined various
quarantine measures, each with a corresponding degree of rigidity ranging from keeping only essential
businesses open to allowing all establishments to operate at a certain capacity. Other measures include
forbidding people of a certain age group from leaving their homes. Depending on the extent of the pandemic in
their area, local government units (LGUs)–municipalities and provinces–can implement any of these measures.
The goal is to limit the number of infections and deaths while minimizing the economic impact of the pandemic.
Some local governments have responded admirably to the COVID-19 pandemic.

Source: Brookings Institution

With the increase COVID-19 positive the admission to Public and Private Hospitals are also increasing. The
Philippines took a number of steps, including establishing a community quarantine in Metro Manila, which was
later expanded to other parts of the country; increasing testing capacity from one national reference laboratory
with the Research Institute of Tropical Medicine (RITM) to 23 licensed testing labs across the country; and
working to ensure that its health care system can handle surge capacity, including financing services and case
management. As the responses of the local government were seen as crucial in the containment of the pathogen
in the country.

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As the responses of the local government were seen as crucial in the containment of the pathogen in the country.
The helped of the Inter-Agency Task Force on Emerging Infectious Diseases has outlined the different degrees
of rigidity the local government was taking. Another was the certain age bracket of people who are allowed to go
outside. They helped in the surveillance as it is a critical component and used to detect the cases of COVID-19
as well as understand the dynamics and trends and identify the hotspots of the disease transmission.

Contact Tracing was also implemented because it is crucial to the response. A system to detect and isolate
cases and identify close contact who will be advised for a quarantine. The WHO assisted the DOP Epidemiology
Bureau in developing the COVID KAYA, a case and contact tracing reporting system for epidemiology and
surveillance officers.

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Infection Prevention and control was also created to help protect the parents and health workers from the
possible transmission of COVID-19 inside the health facilities. It is vital in minimizing the harm caused by the
spread of the infection in these facilities. The WHO supported the DOH with the provision of personal protective
equipment (PPE) for the health workers.

Source: World Health Organization

Laboratory testing for COVID-19 is also critical as it will be able to identify, treat, and isolate the positive patients,
and stop the transmission of the infectious disease. There are 23- Real-time reverse transcription-polymerase
chain reaction (RT-PCR) laboratories nationwide that were conducting COVID-19 diagnostic tests.

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Clinical care was also given attention as there is a lot unknown to the disease that is affecting the whole
economy. Non-pharmaceutical interventions are also being conducted with the aid of helping the mental health of
the people as they might feel fearful and anxious about the pandemic. Risk communication and community
engagement were also implemented to have effective communication that is essential for people to grasp the
situation. WHO also worked with UNICEF and OCHA in reaching vulnerable groups, getting feedback, and
understanding their information needs. There are also other government interventions and policies like logistics
support, subnational operations support, responding to the outbreak in high-risk areas, and moving forward with
a response.

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https://www.who.int/philippines/news/feature-stories/detail/100-days-of-covid-19-in-the-philippines-how-who-
supported-the-philippine-response

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