PRESENTATION OF SECRETARY KARL KENDRICK T. CHUA
MANAGEMENT ASSOCIATION OF THE PHILIPPINES ECONOMIC BRIEFING
FEBRUARY 10, 2022
Good afternoon to the Management Association of the Philippines. And thank you very much for inviting me to this very important forum.
The presentation is about revving up towards a full recovery in 2022. Let me try to cover three important topics and these are also the high level priorities for 2022 and beyond. I will spend a bit more time on the first, a bit less on the second, and just give a general idea of the third and maybe reserve the third, which is mitigating and adapting to climate change for a future topic. But for me, I think these are the most important high-level priorities that the administration and the next should focus on.
The first is recovering from COVID-19, the second is raising productivity and this is very important if we want to sustain our growth as a high or upper-middle-income country towards high-income country, and the third is the mitigating and adapting to climate change.
So let me first give overview of the recent developments. As you all know, the Philippine economy grew by 5.6 percent in 2021. And this is above expectations. As you can see prior to the pandemic we were recording around 6 percent average growth for the four years prior to the pandemic. Because of the pandemic and our stringent quarantines growth fell to as low as -17 percent. But we gradually improved our growth, quarterly growth and in the last three quarters, we registered positive growths, and for the full year, the average is 5.6 percent.
On a seasonally adjusted quarter-on-quarter basis, the economy continue to expand despite several searches of the COVID-19. Notably, in the second quarter, we saw the recurrence of COVID, which led us to impose the ECQ again. We also did that in the third quarter. But notice that despite that, we recorded positive year-on-year growth and positive quarter-on-quarter growth, and this is because of our effective risk management as opposed to what we did in the year 2020.
The strong 2021 performance attests to our correct risk management strategy. Basically, what we did was to move away from stringent quarantines to more targeted ones and manage the risks by focusing on those spaces, the crowds and the close contracts, and using granular lockdowns and that allowed us to achieve a 5.6 percent GDP growth. That was above an adjusted target of 5 to 5.5 percent for 2021. I believe the stage is now set forth for us to grow and accelerate to 7 to 9 percent in 2022. Despite the setback of the Omicron variant in the first month of this year, we have seen the virus go away fast and we were able to manage the risk and see a more responsive or more open economy in the latter part of January. At the same time, job indicators are closer to pre-pandemic levels as we open the economy and manage risk despite the spikes. The target that we are trying to achieve is to get to unemployment rate of below 5 percent. Prior to the pandemic, we were at 5.3 percent unemployment rate. This went up to as high as 17.6 percent. That is the red line that you see [in the presentation] but in 2021 because of our more risk-managed approach and our opening of the economy further, we were able to gradually bring down the unemployment rate to 6.5 percent in November, which is the latest data. We also started around last year to record unemployment on a monthly basis, and this is our way of making sure that we can get data faster and adjust policy even faster. And so, in the end, what we saw is a 2.9 million more employed Filipinos compared to the pre-pandemic level. So this is a very good sign that the job indicators are responding to our opening of economy.
However, we saw an increase in the poverty rate. The poverty rate among the population expectedly, as expected, increase in the first half of 2021. Recall that in 2015, the poverty rate was 26.3 percent for the first half of that year, and by the second, by 2018 first half, it went down to 21.1 percent and because of the pandemic and the quarantines we imposed, it slightly went up to 23.7 percent. But we expect that this will improve significantly in the second half of 2021 due to our better growth outcomes.
So in a nutshell, this is the economic and social situation in 2021. To address our present need to accelerate and sustain economic recovery, the Economic Development Cluster of Cabinet has proposed to the President a ten-point policy. And let me just go over this quickly. I’m sure you have seen a fuller presentation in the past.
So in the final months of the Duterte administration, we will vigorously pursue the economy’s full recovery to restore jobs, and bring more people out of poverty. There are ten items. The first is on (1) metrics then (2) vaccination, then (3) the healthcare capacity. And then number four is the economy and mobility. Number five, very important, is schooling. Six and seven are domestic and international travel. Then we have (8) digital transformation. Number nine is pandemic flexibility bill that we need in case of a future pandemic, and number ten is our medium-term preparation for pandemic resilience.
In the succeeding slides, I will just highlight a few of the ideas just to remind all of you of what this ten-point policy is about.
As we move from a pandemic to a more endemic paradigm, we have to, I think, begin with changing our metrics when we make decisions. So currently, we are still focused on total cases. We propose that as more people get vaccinated, as this virus becomes more endemic, we shift to monitoring total severe or critical cases. In other words, those that require hospitalization, instead of total deaths, we look at case fatality ratio and we continue to monitor those who are totally vaccinated. This is important so that the rise in case need not lead to an ECQ or alert level four or five. And in January of this year, we had a natural experiment when we saw that the cases did increase significantly but we did not move beyond alert level three because the total severe and critical cases were very well manageable.
The second is to pursue our vaccination drive. As of the 29th of January, we have administered 126 million doses where of which 58 million have gotten their full dose and 7 million their booster dose. Next, this week, actually we are starting the vaccination of children 5 to 11 [years old]. So that is a very good development and we should pursue this so that schools may open.
On healthcare capacity, we have increased total COVID-dedicated beds by seven-fold, but occupancy rate has really declined. That is currently at 44 percent and we saw this in NCR in January. While cases were at historic highs, our hospital capacity were more than enough. In fact, we did not even exceed 70 percent to warrant an increase in the alert level beyond alert level three. So we will continue, I think, to expand this to make sure that we are ready all the time to care for the very sick people from COVID-19.
Number four is basically, as I mentioned, opening of the economy and public transportation, and we have done this simple chart wherein every week that we move from one alert level to another, we incur a loss or again. So for instance, by moving from alert level three to alert level two, we have added to the economy, 3 billion pesos per week to the NCR Plus area and we have reduced the unemployment rate or number of people who are unemployed by 51,000. And if we continue to work together and see alert level one, hopefully by the next month, then we would have added 11.2 billion pesos in gross value added per week in the NCR Plus area and reduce the number of unemployed by 191,000. So fortunately, we did not see the need to shift to alert level four, which would be very bad for the economy in 2022.
Number five is the opening of our face-to-face schooling. Before the start of the pilot face-to-face classes last November, the Philippines was the only country in the region to have closed school, face-to-face schooling, for more than a year. And this is something we want to reverse very soon, especially as more kids get vaccinated. We have also estimated the significant decline in productivity of around 11 trillion peso for every year that face-to-face schooling does not happen and we do not want this school year to end with zero face-to-face schooling. In many countries in the region, and in other countries that we monitor, the schools are finding ways to reopen for in-person learning. So this chart [in the presentation] shows you the various characteristics of how they pursue their face-to-face school opening. And our thinking in NEDA is we will not get it right at the start, but it is crucial to pilot immediately more schools so that we learn from the pilot. And the more we pilot, the more we will learn, the more we can get it right. But if we don’t pilot or we limit the pilot or we don’t pursue this, then we will never get it started.
Number six is on domestic travel. We can safely boost domestic travel by minimizing and harmonizing travel requirements. In the past or up to today there are many passes. Once I went to Mindanao and I had to prepare seven passes. What we propose are basically two: (1) The vaccination certificate and (2) a single QR code that is interoperable or interscannable and I hope we will get to that soon.
On number seven, international travel. Recently, we had restrictions on who can enter the country and we also had a quota on daily flights. But we’re very pleased that we are now moving away from that. In fact, the IATF rules are now to forego quarantine for vaccinated passengers and to remove the color coding of countries and to hopefully eventually remove flight or passenger daily quota. That will help in the recovery of international travel.
Number eight is the acceleration of digital transformation especially important if there is another pandemic. We are very happy to note that the Public Services Act Amendment was already ratified by Congress and would soon be enrolled and would only need the President’s signature. Apart from that, we think we should fully implement a number of laws or regulations that would allow more access to digital technology. And there are several more bills that we think should be enacted to further enhance our digital transformation.
Number nine is the enactment of a pandemic flexibility bill so that we do not need to go to Congress for another Bayanihan III or IV or V when a pandemic strikes. This is similar to the NDRRMC law so that we are better prepared for future public health emergencies so that we have budget flexibility, we can relax data privacy, we can use electronic transactions, and our national and local government would have more aligned policy and we would be more prepared, for instance, with a medical reserve core.
And finally number 10. On the medium term is a pandemic playbook that would help us prepare, taking stocks of lessons learned. Prevent pandemics by implementing a more healthy lifestyle and to mitigate the impact of future pandemics by further strengthening our social protection system. And the National ID, which has registered, I think, close to 55 million, is one important step towards that transformation.
So these are, in summary, the ten-point policy to accelerate and sustain our economic recovery in 2022 and onwards, and many of these have been implemented and we need to do more and sustain if we are our 7 to 9 percent target – growth target – this year.
Let me now end with four top priorities of NEDA that I see are very important. We are preparing the foundation for this and I hope the next administration would continue the work. And we are thinking about how we can improve productivity over the medium term and we think that we need to focus on a number of important thematic.
The first is smarter infrastructure. We have built a lot of infrastructure, but I think they can be smarter. In other words, more connected, more in line with urban planning, with urbanization, networks that actually work, that actually improve the travel and experience or condition of the people, instead of having many of our countrymen falling in line and wasting hours trying to connect from the MRT to the bus, to the jeep and so on. We also have to bear in mind that more roads are not necessarily good if they will just produce more emissions. So in the coming months we are going to propose, for instance in NEDA, a policy on having a more coordinated master planning.
The second is regional equity. We realize that while we have many projects, there is a lot of inequality. There are regions or provinces that badly need projects, whether it be in telecoms, water, sanitation, but hardly get it. So we are proposing a way to have more equity in the allocation of the budget for infrastructure based on a more objective assessment, not only based on how well a region or a province or our politicians fight or lobby for the projects. And an important element of this is to create a single unique project ID for all projects whether they are emanating from the national government, the Regional Development Council, or the local government. So we can monitor projects from identification, to completion, to evaluation.
The third is innovation. We have a Philippine Innovation Act and I believe this is crucial in paving the way towards our bid to become an upper-middle income country, hopefully by this year and to graduate to high-income country status in one generation. So instead of just copying new ideas or research and development done in other countries and assembling them here, we would like to pursue having those new ideas, new products, new ways of doing things in the Philippines. And this need not be in high technology. I think they should be also in basic sectors like agriculture, and in availing of basic services for the people.
And finally, is the issue on mitigating and adapting to climate change. This is a very important topic. In fact, I have proposed that the NEDA, together with the other agencies, work together to ensure that the… or to propose that the next Philippine Development Plan would have climate change as the core of our development planning and whether, all other sectors, whether it be in agriculture, infrastructure, energy, would evolve policies that are fully supportive of our goal to mitigate or adapt to the impact of climate change. So these are some of the important priorities that we, in NEDA think, should form the foundation of the next administration so that we can further accelerate and sustain growth after we address the COVID 19 pandemic threat. With that, thank you very much. I look forward to your questions later.