A P1.84-trillion loss—due to gov’t bungling

By: Solita Collas-Monsod - @inquirerdotnet - Columnist/Philippine Daily Inquirer | November 28,2020 - 08:00 AM

What has the country lost to COVID-19? This column will not deal with the number of deaths (8,242), or the number of cases (424,297), or translate these into all sorts of indicators, like number of work days lost or amount of income foregone, or medical expenses, etc. It is not that these are not important—they are indeed the human face of what the virus has done to us, its social cost.

Instead, I will talk about the economic cost—the lost output or Gross Domestic Product (GDP) that the country has incurred in the first three quarters, or nine months of 2020, from January through September. You may huff and puff, Reader, and say that we know all about that. Weren’t we told that the economy contracted by 0.7 percent in the first quarter, by 16.5 percent in the second quarter, and by 11.5 percent in the third quarter?

Yes, of course. But what does that mean to Juan de la Cruz, who barely knows what GDP is anyway, much less what a contraction means? Never mind Juan de la Cruz. Let’s talk about our legislators, particularly in the House of Representatives (with the exception of Stella Quimbo, and Joey Salceda, and a few others). Because there seems to be a disconnect between what our economic problems really are and how they are dealing (or dealt) with them in the budget process.

So: How much did the contraction in the economy really involve in pesos and centavos? Let’s go to the Philippine Statistics Authority and find out. The PSA National Accounts shows that GDP (at constant 2018 prices) in the first three quarters of 2019 amounted to P14.1 TRILLION. But in the first three quarters of 2020, GDP was P12.7 TRILLION. Domestic output, then, contracted P1.4 trillion, or 10 percent. Is that what COVID-19 cost us in terms of output?

No, Reader. Because had these been non-COVID-19 times, GDP would have grown by 6 percent—actually, 6.1 percent, according to the World Bank’s January 2020 forecast, and 7-8 percent, if one looks at the Philippine Development Plan. But let’s stick to a 6 percent growth. That would mean that without COVID-19, the Philippines should have posted a GDP of P15 trillion for the first three quarters of 2020. But as mentioned above, it actually posted only P12.7 trillion. So the country’s output/employment loss for the nine months of 2020, we can safely say, is P2.3 trillion. That’s P2,300,000,000,000.

Is this all due to COVID-19? I submit that a major part of this loss is due to the government’s failure to respond adequately (e.g., ineptitude) to the health crisis. In other words, the P2.3 trillion can be further decomposed into the effects of COVID-19, and the effects of government bumbling.

I am sure an econometric model can be constructed to test this hypothesis. But for now I will depend on the World Bank’s forecasting models, and use the actual performance of Vietnam, Indonesia, Thailand, and the Philippines. What I am suggesting is that the difference between forecast and actual figures can be used as a proxy for government ineptitude.

In June of this year (right in the middle of the pandemic, mind you), the World Bank gave the following forecasts: Thailand would contract (post a negative growth) by -5 percent, Indonesia would have zero growth, Vietnam would grow by +2.8 percent, and the Philippines would contract by -1.9 percent.

What was the actual growth experience of these countries for the first nine months of 2020? Thailand contracted by 7.1 percent, Indonesia contracted by 2 percent, Vietnam grew by 2 percent, and the Philippines contracted by 10 percent.

Do you notice, Reader, how large the difference is between the forecast and the actual figures in the Philippines? A difference of 8.1 percent. Compare that to the difference for Thailand at 2.1 percent, for Indonesia at 2 percent, and for Vietnam at 0.8 percent. That’s what I mean when I say that the government made more of a mess than the governments of the other countries. And we still have three months to go.

Following this line of reasoning, around P460 billion of the country’s output loss can be attributed to COVID-19. And P1.84 trillion to the errors and omissions of government. More or less. If you have a better idea, Reader, please do not hesitate to put it forward.

And you know what the worst part is, Reader? It seems that our government has not yet learned its lesson. I’ve heard some officials state that the 10 percent growth contraction of the Philippines is peanuts compared to the contraction of Germany, or United Kingdom, or Spain. Since when do we compare ourselves with those countries?


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TAGS: bungling, contraction, COVID-19, economic cost, GDP, Juan dela Cruz, P1.84 trillion, P2.3 trillion, World Bank

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