The Philippines, Covid-19 and debt: Left alone to deal with the pandemic
The Philippines has been in a vulnerable position since the beginning of the Covid-19 pandemic. This vulnerability can be explained by social, economic, health and financial factors. As a result of these pre-existing conditions, the crisis has been acutely felt by the population of the country.
The Philippines has been in a vulnerable position since the beginning of the Covid-19 pandemic. This vulnerability can be explained by four factors: firstly, the close social and economic ties and geographical proximity between China and the Philippines. Secondly, the constant flow of outward migration of Filipino contract workers and, with cyclical migration, an increasingly mobile population. Thirdly, a weak public healthcare system that is a legacy of decades of inadequate financing because of prioritisation of debt service. And last but not least, significant social and economic inequalities. As a result of these pre-existing conditions, the crisis has been acutely felt by the population of the country.
In February, the Philippines experienced the first Covid-19 death outside China. Since then, the country has reported more than 304,266 active cases and a total of 5,344 deaths caused by Covid-19. In response to the pandemic, the government enforced lockdown measures from 16 March. The Philippines ended up with one of the longest and most strict lockdowns in the region. However, deep inequalities, a lack of adequate safety nets and a strained healthcare system affected the ability of these measures to contain the spread of the pandemic. On July 31, 80 groups representing 80,000 doctors and one million nurses said the country was losing its fight against Covid-19. They warned about the potential collapse of the healthcare system unless stricter measures and recalibrated strategies were put in place by the government.
In the meantime, the population of the country has been left to deal with the economic consequences.. Before the pandemic, the economy was projected by the International Monetary Fund (IMF) to grow by 6.3 per cent in 2020. Since then, the Fund has slashed its provisions and the economy is now set to decrease by 3.6 per cent in 2020. As a result of this sharp downturn millions of people have lost their livelihoods. An estimated 7.3 million people have temporarily or permanently lost their jobs. The Department of Labor and Employment (DOLE) estimates that around 10 million workers may lose their jobs this year. Hunger and poverty are on the rise, and the number of families experiencing hunger increased from 2.1 million in December 2019 to 4.2 million in May 2020. The government estimates that without any support measures, there will be an additional 5.5 million people living in poverty.
In addition to this, the pandemic has also had clear consequences for gender equallity. These consequences are largely shaped by pre-existing multiple and intersecting discrimination faced by women in the Philippines. They are over-represented in the informal economy and in paid and unpaid care work, and under-represented in formal employment, including decision-making structures and processes in the home and public spheres, as well as in ownership of land and other assets. In addition to economic inequality, women in the country are also highly vulnerable to domestic violence. Since the start of the lockdown in March until mid-June, more than 4,200 cases of violence against women and children have been reported by the Philippine National Police (PNP).
The government of the Philippines has put in place a four-pillar strategy to address the impact of the pandemic. Pillar 1 consists of emergency support for vulnerable groups and individuals amounting to 11 per cent of GDP. Pillar 1 is partly funded from an Asian Development Bank (ADB) grant for rapid emergency supplies. Pillar 2 funds expanded medical services to fight Covid-19 with a budget amounting to 0.3 per cent of GDP and has received World Bank financing. Pillar 3 is composed of programs to finance small businesses for an amount equivalent to 0.6 per cent of GDP. Lastly, Pillar 4 provides social protection for vulnerable workers, including displaced and overseas Filipino workers, totalling 0.3 per cent of GDP. In total, the government has mobilised resources for 3.1 per cent of GDP (US$ 12.2 billion).
As well as being insufficient to contain the socio-economic impact of the crisis on the population, the Covid-19 response package has also caused an unprecedented increase in debt. Public debt is expected to increase from 34.1 to 48 per cent of GDP between 2019 and 2020. Before the start of the pandemic, external creditors held claims on the public sector equivalent to 13.9 per cent of GDP. Their participation in the overall composition of debt is likely to fall further as most of the financing during 2020 has come from domestic sources. In the short term, this has helped the country to avoid requesting emergency financing from the IMF. The large share of domestic debt has allowed the government to finance its operations without external support. Actions of the government have been supported by the central bank of the country, which has reduced its interest rates four times over 2020.
However, the lack of support from the international community for countries like the Philippines has stark costs. As a middle-income country, the Philippines is excluded from participating in the G20 Debt Service Suspension Initiative (DSSI). Before the crisis, the country had an annual debt service requirement equal tor 6.6 per cent of GDP. This figure is about to increase substantially as a result of the pandemic. Without measures to address the debt burden, and few options to increase revenue, the only choice left is to implement harsh austerity measures. The government has already laid out plans for significant fiscal consolidation starting in 2021, which is likely to increase the hardships being experienced by the population.
It is imperative that countries such as the Philippines are not left alone to fend for themselves. Lenders need to acknowledge the illegitimate character of a large share of the debts incurred by developing countries. In addition to this, we need to recognise the existence of historical, social and ecological debts tied to the legacy of colonial and post-colonial exploitation of countries in the global south. It is only when those debts have been acknowledged and cancelled that developing countries will have a chance to recover.