How does CoViD-19 affects the economy in the Philippines

The Philippines has a growing economy over the past years and is sure to continue as more development is yet to come. However, as the country is facing great havoc due to the global pandemic-CoviD19, there has been a drastic change over these past months. With the implementation of community quarantine in every city and provinces, establishments are forced to shorten business hours, adopting a skeletal workforce or even implementing temporary closure for those that are not exempted, to abide by the protocols issued by the government.

Economic blow due to pandemic

It is expected that the Philippine economy is projected to fall into a recession this year 2020 due to the worldwide pandemic caused by Covid-19. According to the National Economic and Development Authority (NEDA), the Philippine economy contracted by 0.2 percent in the first quarter of the year, the first decline recorded since the fourth quarter of 1998; as travel restrictions and lockdowns crippled business activity and household consumption.

This is the first contraction in the country’s real gross domestic product (GDP) since the fourth quarter of 1998, which came after Asian financial crisis and during an El Nino drought. But Philippine officials say that the worst is yet to hit and that the economy could contract in the next two quarters.

Source: https://asia.nikkei.com/Economy/Coronavirus-snaps-Philippines-21-year-growth-streak

The NEDA study also showed that the country stands to lose between P428.7 Billion to P1.355.6 Trillion in gross value added (GVA) or equivalent to 2.1 percent to 6.6 percent of its gross domestic product (GDP) this year, “given the simultaneous adverse effects on the supply and demand side of the economy.”

Jobs lost

At the end of the year 2019, the Philippines has recorded the lowest unemployment rate at 4.8 percent. But due to the unfortunate economic impact of Covid-19, the unemployment rate soared at 17.7 percent as of April 2020, or at least 7.3 Million Filipinos had lost their jobs.

Most of the jobs lost were in the arts, entertainment, recreation, information, communication and construction sectors, as well as in the food and hotel industries. The government also reported that two in five of those who still had jobs were working from home in April.

Source: https://www.straitstimes.com/asia/se-asia/philippines-unemployment-rate-at-record-high-in-april

Transitioning to “New Normal”

To rebuild the economy, the Philippines is transitioning to the “new normal” starting June 1. President Rodrigo Duterte announced last May 28 that he is lifting the Enhanced Community Quarantine which is seen as the “strictest and the longest lockdowns enforced in South-East Asia.

While the government has encouraged companies to adopt a work-from-home set up for their employees, other businesses such as the information technology-business process management (IT-BPM) services are now allowed up to 40 percent of the workforce to work on their respective offices, on a shifting basis.

With continuing policies and measures for physical distancing and the call to ‘stay at home,’ the increased preference for online transactions for both consumers and merchants will be a challenge. More supermarkets and restaurants will now engage in online shopping platforms or integrate delivery services into their operations.

To boost the country’s revenues, taxation in the digital economy is taken into serious consideration which is also true not just in the Philippines but also in other parts of the world like Indonesia, Malaysia, and Singapore. While the businesses are expected to change strategies and shift to online transactions, the government is looking into establishing a digital taxation framework.

According to NEDA, “Under the new normal environment, there will be an increasing need for MSMEs to undertake business continuity planning and capacity building (such as digital skills, digitalizing operations, knowledge transfer, and information sharing, and mentoring) to strengthen resiliency to disruptions.”

Source: https://business.inquirer.net/298063/new-normal-businesses-seen-shifting-to-digital-as-govt-scour-ways-to-tax-them