September 25, 2021

Socioeconomic Planning Secretary Karl Kendrick T. Chua said the estimated long-run total cost of the COVID-19 pandemic and quarantines for present and future generations of Filipinos is estimated at 41.4 trillion pesos.

“Over the past six months, NEDA, with assistance from our development partners and attached agencies, has been estimating the total cost of COVID-19 and the quarantines. The present and future costs are estimated at 41.4 trillion pesos in net present value terms. Broken down, in 2020, we lost 4.3 trillion pesos; in the next 10 to 40 years, we estimate that we will lose up to 37 trillion pesos,” Chua said.

Chua added that consumption and investments are likely to be lower in the next ten years due to the reduced demand in sectors that require social distancing, such as tourism, restaurants, and public transportation. Consequently, tax revenues will be lower if businesses cannot operate at 100 percent.

According to him, the estimated total loss due to lower consumption is 4.5 trillion pesos. Meanwhile, the loss in private investment and returns in the same period is around 21.3 trillion pesos.

“We expect the economy to converge to the pre-pandemic growth path by the tenth year. While we will recover to the pre-pandemic level by the end of 2022 or early 2023, it will take several more years before we converge to our original growth path,” Chua said.

Another key finding of the study is that workers’ productivity will also be lower due to untimely death, illness, and lack of face-to-face schooling. The impact of these on productivity is likely to be permanent over the next 40 years or the average number of years a person is expected to work in his or her lifetime.

Based on the study, the resulting productivity loss in human capital investment and returns is estimated at 15.5 trillion pesos for the next 40 years. Of this amount, 4.5 trillion pesos are losses due to premature deaths, and the loss in productivity from sicknesses and the inability to access treatment from other diseases and illnesses associated with recovery from COVID-19. Moreover, this also accounts for additional healthcare costs associated with these various diseases and sicknesses.

Meanwhile, the remaining 11 trillion pesos represents the reduction in future wages and productivity, as a result of the suspension of face-to-face classes in school year 2020 to 2021, and the lost wages of parents who forgo or reduce work hours to accompany their children in online classes.

The loss in future wages is based on the impact of lower quality education from online and other types of distance learning during the pandemic. According to the Asian Development Bank, every year of lost schooling leads to a 10 percent permanent decrease in future wages. Using US data adjusted for Philippine education levels, NEDA estimates that in the Philippines, online and modular learning is only 37 percent as effective as face-to-face learning. While this tempers the full impact of total school closures, the prolonged use of distance learning will lead to lower future productivity and consequently lower wages.

“The one-year school closure cost the economy 230 billion pesos in 2020, and its impact over the next 40 years of the students’ lifetimes in the labor force is estimated at 10.7 trillion. This impact on productivity is likely to be permanent over the person’s lifetime,” Chua explained.

To address the impact of the COVID-19 pandemic and mitigate the long-term scarring effects on the economy and the people, Chua underscored the importance of the three pillar strategy. This includes i) accelerating the vaccination program by expanding vaccination sites and leveraging new technologies, ii) opening the economy safely through localized lockdowns and pilot face-to-face classes, and iii) fully implementing the recovery program, especially the 2021 budget.

“Let us use this pandemic to get everyone to work more urgently to address the problems we have now. Our recommendations have not changed. We can still recover to pre-pandemic level by the end of 2022 or early 2023, with a growth rate of 4 to 5 percent this year, and 7 to 9 percent next year, if we do these three things,” Chua affirmed.