Extended ECQ: COVID-19 and its impact on the Philippine economy

Extended ECQ: COVID-19 and its impact on the Philippine economy


UnionBank Publication

UnionBank Publication

28 Apr 2020, 13:30 — 5 min read

A previous economic research note1 (ERN) pointed out two (2) scenarios for the Philippine economy: 1) Optimistic case; and, 2) Worst-case. The Optimistic case was largely based on the UP Covid19 Pandemic Response Team’s epidemic scenarios (Figure 1), where a Modified Community Quarantine (MCQ) will take effect after the Enhanced Community Quarantine (ECQ) on April 30th, in order to flatten the infection curve without paralyzing the domestic economy.

Figure 1

An OECD initial impact assessment paper puts the decline in annual GDP growth for each month of strict virus containment measure, such as the ECQ over Luzon island, can shave off as much as two (2) percentage points.   President Duterte recently ordered the lifting of ECQ in much of Luzon island. However, ECQ will remain in “high” risk areas (Figure 2). Other “moderate” and “low” risk areas will now be under a General Community Quarantine (GCQ). With the changes, 90% of Luzon is still under ECQ and 10% now under GCQ, and a total of 86.2% of the Philippine economy still under ECQ. Still, probable GDP growth for 2020, with a GCQ until August plus the ECQ, may potentially settle to less than 1.0%. Using our NowcastingPH model, GDP for 2020 may settle at 0.7%. 

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Figure 2

For the Worst-case scenario, a situation predicated on the US Federal Reserve’s “rolling shutdowns” or locally can be referred to as “rolling ECQs”, where an outbreak recedes and a flattening of the curve happens. However, infections flare back up again when the economic controls or non-pharmaceutical interventions (NPIs) are relaxed.5 This scenario is also patterned after the Wshaped scenario wherein the efforts to control the pandemic are loosened prematurely, the virus outbreak stage could comeback. This scenario bares the critical assumption that the return to normalcy is hinged on the availability of an effective anti-viral treatment or drug and/or an already widely available working vaccine versus COVID-19.

Figure 3

In our simulations, the month of August this year and January 2021 are anticipated months of COVID-19 cases resurgences, and March 2021, as a probable month when a vaccine may be discovered (This is from an optimistic premise that it usually takes 12-18 months for a vaccine to be readily available). In this Worst-case scenario, GDP growth 2020 sags to -3.4%. Even with the intervention (NPIs) changes, previous views are maintained, both optimistic and worst-cases.

Also read:
COVID-19:  A change of direction for MSMEs

UnionBank Economic Research Unit (ERU) sees Q1 GDP 2020 growth at 4.5%. The Taal eruption last January and the COVID-19 pandemic’s initial impact in last half of March are considered to be the main drivers of Q1 potential growth level. ERU maintains that Q2 will be negative growth due to the collapse of domestic demand and investments


Article by: Ruben Carlo Asuncion

Image source: Freepik

Disclaimer: While this document is based on information obtained from sources we believe to be reliable, we do not make any representations as to its accuracy, completeness, correctness, timeliness or use for any particular purpose. Opinions and statements expressed here are those of their author(s) as of the date of this report and not of Union Bank of the Philippines (UBP). The opinions and statements provided in this document are subject to change without prior notice. Any recommendation contained in this document does not have regard to the reader’s particular investment objectives, financial situation and any other specific needs. This document is for informational purposes only and UBP is not soliciting any action based on it. Nothing here shall to any extent substitute for the independent investigations and the technical and business judgment of the reader. Your use of this document and any of its contents is at your own risk and UBP does not accept any liability for the results of any action or decision taken on the basis of or reliance on this document or any of its contents

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