BY ANGELA CELIS AND IRMA ISIP
Economic managers and businessmen believe the reimposition of modified enhanced community quarantine (MECQ) in Metro Manila and some neighboring provinces, even though short-lived, will have an adverse effect on the economy.
Employers estimate up to 3 million workers will be displaced in the next two weeks.
In a briefing late Sunday, the government placed Metro Manila as well as Bulacan, Rizal, Cavite and Laguna under MECQ from August 4 to 18, from the current general community quarantine (GCQ) status, amid the call of health care workers for a “timeout,” as cases of the new coronavirus disease 2019 (COVID-19) continue to rise.
View from gov’t
In the short run, the return to MECQ “may negatively affect livelihoods, consumer demand and production,” Carlos Dominguez, Department of Finance secretary, told reporters in a Viber group yesterday.
“However, if the time is used to boost all our medical resources and to prevent further spread of the virus, then the MECQ will be positive for the long haul,” Dominguez said.
Ramon Lopez, secretary of the Department of Trade and Industry (DTI), said the return to MECQ is a temporary step back to heed the call of medical practitioners.
“Under the MECQ, there are still a number of business sectors allowed although most at limited scale, while some of the recently allowed sectors under GCQ such as dine-in restaurants, barbershops, salons and the recent additions such as gyms, review and testing centers, other personal grooming shops, internet cafes, shall not be allowed temporarily in the next 15 days,” Lopez said.
Lopez expressed hope this break will allow businesses to sufficiently prepare for better processes and facilities for compliance to the health standards when they soon reopen.
Karl Kendrick Chua, acting socioeconomic planning secretary, was sought for comment by reporters regarding the impact of the shift to MECQ on the economy, however the National Economic and Development Authority said it is still doing its “technical analysis.”
Earlier in July, it was pushing for the further easing of restrictions in the National Capital Region (NCR) and Calabarzon, or regions which account for a significant chunk of the economy, to support efforts to rebuild and recover from the COVID-19 pandemic.
Another hurdle
About 2 to 3 million workers will be displaced in the next two weeks in areas placed back to MECQ, which captains of industry view as an additional hurdle for business recovery.
Sergio Ortiz-Luis, president of both the Employers Confederation of the Philippines (ECOP) and the Philippine Exporters Confederation Inc., said these workers will be on “no work, no pay” status since they have likely used their leave credits during the earlier stricter lockdowns.
Ortiz-Luis said these come from the ranks of micro, small and medium enterprises (MSMEs) which can no longer afford to pay these workers. Some companies, he said, which have just opened up may now close again, this time permanently.
Ortiz-Luis hopes local government units would be able to give financial aid to their constituents if the national government no longer plans to do so.
Eduardo Lacson, ECOP chairman, for his part said the additional lockdown would make recovery extremely difficult to all enterprises, most specially the MSMEs, the backbone of the economy which comprise 99.6 percent of registered corporations.
“After the 75 ECQ and countless extension of MECQ (and GCQ) days, businesses are down on their knees… It is unfortunate that the National Capital Region and Mega Manila which account for more than 60 percent of our GDP (gross domestic product) are placed under MECQ again,” Lacson said.
He said the economic uncertainties brought by the on and off quarantine imposition make businessmen hesitant and afraid to restart or continue operations.
According to Ortiz-Luis, as it is, there are 4 million other workers who have not gone fully back to work even under the GCQ.
These are those who have been asked to work from home, go on shorter hours or limited working days due to various reasons including physical distancing that needs to be observed in workplaces.
“The impact on business is significant,” said Ortiz-Luis, adding services and public transportation alone will cut economic activity.
Even supply chain and government services will be affected, he said.
ECOP expects most of businesses will be back to 50 percent capacity except for manufacturing of essentials, exporters and business process outsourcing and services like banks, groceries, drugstores and other establishments which are classified categories 1 and 2.
Benedicto Yujuico, president of the Philippine Chamber of Commerce and Industry, said while the group has no objection to the imposition to MECQ, members are very worried and concerned about the people who will not be able to work during this period.
“If there is no work, there is no salary, no income. Where will they get money for food, medicine, rent and other expenses during this period? Government needs to provide relief for the workers that will be unemployed because of the two-week shift to MECQ,” Yujuico said.
Hard lessons
Lacson said business hopes after this new MECQ, learnings from the harsh lockdown would guide the government task force in laying down well thought-out plans to balance the need to save human lives and livelihood.
“We dropped the ball in crafting our policy response to the pandemic. But finger pointing at this time is divisive and unproductive,” Lacson said.
For Francis Lim, president of the Management Association of the Philippines (MAP), reverting to MECQ is “a bitter but necessary pill, given the plight of our medical frontliners.”
But Lim said MAP hopes the government will deep dive into the country’s COVID-19 strategy and find more effective ways to execute it.
Low stocks
Steve Cua, president of the Philippine Amalgamated Supermarkets Association (PAGASA), said community groceries expect their shelves to go empty in the next few days as consumers stock up for the lockdown.
Cua laments the fact there was not enough lead time to increase their inventory levels before the MECQ was reimposed.
He said following slump in sales in June, PAGASA members limited their inventory and their assortments to cut costs.
He said unlike the big supermarket chains, PAGASA members do not have distribution centers that can serve their network.
As of yesterday, Cua said PAGASA has not observed any panic buying although the number of customers has significantly gone up.
But Lopez assured there is no need to panic-buy as even during the ECQ, supply of food and essential products have never been short.
Lopez said the DTI got reports from various major retailers and manufacturers that the country has two months’ worth of finished goods inventory of almost all basic products and up to three months for raw materials.
Crash landing
The Philippine economy had been one of Asia’s fastest growing before the pandemic but is now on the brink of recession.
Quarterly growth data is due on Thursday and economists expect a deeper contraction compared with the 0.2 percent decline in the first quarter as the pandemic-induced lockdown shuttered businesses and sapped domestic consumption, a main driver of growth.
“We reiterate that the Philippines is indeed headed into a severe crash landing with the probability of the economy returning to its former glory any time soon now declining by the day,” said Nicholas Mapa, economist at ING bank.
“Calls for a fiscal bazooka were parried by authorities citing the need to preserve our ammunition for a drawn out war. After being knocked back in the opening skirmish and routed in the first major battle, we may not be able to rally the troops quickly to victory after such a devastating defeat in 2020,” he added.
“Now back to MECQ, authorities must spend yet again to safeguard the lives of its citizens via cash aid and dole outs, negating any savings made by holding back on spending in the first half of the year. Repeated returns to lockdowns will eventually take its toll both on the economy and the fiscal position of the Philippines,” Mapa also said.
Little effect
The Federation of Free Farmers is not expecting for the reimposition of MECQ in NCR and nearby areas to affect much of agricultural production activities but expressed concerns on the possible problems that may arise from varying implementation of rules.
“Farming and food distribution are essential activities allowed to operate even under MECQ. Despite these, however, it is inevitable that the delivery of food to MECQ areas and goods from such areas to farming communities will become harder as checkpoints and restrictions on movements of vehicles and people are tightened again. Those implementing the MECQ will need to be reminded again on how to treat agricultural activities,” Raul Montemayor, the group’s national manager, said in a statement.
Meanwhile, the Independent Electricity Market Operator of the Philippines (IEMOP) said it is yet to conduct a simulation on the likely power demand in the Luzon Grid amid the impending reinstatement of the MECQ.
However, Robinson Descanzo, IEMOP trading operations head and acting chief operating officer, said based on actual demand, even before reverting to that quarantine level, power usage has been low due to lower temperatures brought by the rainy season.
“Peak demand for the year were at 12,444 megawatts (MW) for July; 12,611 MW for June and 11,567 MW for May. If rains persist, demand will go down and there is also a possibility that August demand may be lower compared to July,” Descanzo said.
He said Luzon and Visayas peak demand in May, June, July and August 2019 stood at 13,316 MW, 13,450 MW, 13,040 MW and 12,653 MW, respectively.
“The return to MECQ may further affect demand downwards. In terms of average spot prices, June 2020 was at P3.25 per kilowatt hour (kWh) as July was at P2.09 per kwh compared to 2019 when prices were at P8.38 per kwh in June; P4.99 per kwh in July and P3.00 per kwh in August,” Descanzo said.
