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Luzon quarantine threatens to displace 1 million jobs

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The month-long enhanced community quarantine in Luzon could threaten the jobs of a million workers, according to a study by the National Economic and Development Authority (NEDA).

In its economic impact report as of March 19, the NEDA noted that the Luzon-wide “lockdown” is expected to reduce employment by 61,000 to one million persons.

This as the enhanced community quarantine in the mainland region is seen to bring significant losses to retail trade due to mall closures; cancellation of flights; reduced operation in airports; idleness in non-food and non-health-related manufacturing and service activities

“Based on the guidelines for the enhanced community quarantine, private establishments that provide basic necessities will remain open. These include activities related to food, health services, banking services such as supermarkets, hospitals, pharmacies, food preparation and delivery services, manufacturing and processing plants of basic food products and medicines, water-refilling stations, banks, money transfer services, utilities, among others,” NEDA said.

Also, included to remain open are business process outsourcing establishments and export-oriented industries.

The NEDA also estimates that the Luzon-wide quarantine could result in the loss of gross value added of P298 billion to P1.1 trillion, equivalent to 1.5% to 5.3% of gross domestic product.

The state planning agency noted that Luzon accounted for the lion’s share of 73% in the country’s GDP, compared to Visayas' and Mindanao’s contribution of 13% and 15%.

The Luzon lockdown could also increase the government’s fiscal deficit ranging from 4.4% to 5.4% of GDP in 2020.

On top of the Luzon-wide quarantine, the NEDA estimated that the COVID-19 spread’s overall economic impact across various sectors could be as much as P428.7 billion to P1.355 trillion in foregone revenues, equivalent to 2.1% to 6.6% of GDP; and as much as 116,000 to 1.8 million employment reduction.

The following are the disease’s impact per sector:

  • Transport and tourism: P77.5 billion to P156.9 billion in foregone gross value added (0.4-0.8% of GDP) and 33,800 to 56,600 jobs
  • Exports: P4.9 to P9.8 billion in foregone revenues (0.02-0.05% of GDP) and 3,000 to 6,700 jobs
  • Remittances: P3.9 billion to P8.5 billion in foregone gross value added (0.02-0.04% of GDP) and 1,700 to 4,500 jobs
  • Consumption: P45.1 billion to P93.6 billion in foregone revenues (0.2-0.05% of GDP) and 16,500 to 62,500 jobs

“To reiterate, the estimates assume that the adverse impact will be felt until June, though the brunt will be felt during the one month enhanced community quarantine,” NEDA said.

The state planning agency is proposing a three-phase approach to mitigate the social and economic impact of the COVID-19. 

Phase 1A will involve clinical and medical response, the early detection and diagnosis, effective quarantine systems, effective management and treatment protocol, and research and epidemiological studies.

Phase 1B is for public health responses such as travel ban, promotion of proper hygiene, ban on crowded gatherings, school closures, work suspension, flexible work arrangements, and work continuance in essential sectors.

Meanwhile, Phase 1C will be for the short-term augmentation of the Philippines' health systems capacity, such as establishing makeshift outpatient consultation facilities with specimen harvesting, and the increase of supply of personal protective equipment (PPE) and remote quarantine facilities (RQF).

This will be followed by Phase 2 which will rebuild consumer and business confidence.

Phase 3 will involve the resumption of a "new normal" state of economic activity more prepared for another possible pandemic.

“Without mitigating measures, this would imply a reduction in the Philippines’ real GDP growth to -0.6% to 4.3% in 2020,” NEDA said.

“The government’s swift and appropriate response remains crucial in softening the blow of COVID-19, particularly on the most vulnerable members of our society,” it said.

NEDA also took note that attaining the upper bound of 4.3% growth this year is only possible if the government is able to stem the impact of COVID-19 and enhanced community quarantine.

“If the enhanced community quarantine is extended beyond one month, or if the spread of COVID-19 is unabated even after the enhanced community quarantine, then the low-end of the estimate is still too high,” NEDA said. 

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