Prema-chandra Athukorala Comment on Rethinking “Economic Fundamentals” in an Era of Global Physical Shocks: Insights from the Philippines Experience with COVID-19

At the time of the onset of the COVID-19 pandemic, the economy of the Philippines had strong macroeconomic fundamentals—a decade of robust growth at an average annual rate of 6 percent, low inflation, remarkably low external debt exposure, strong fiscal position, and the highest ever sovereign debt rating—which are commonly identified as prerequisites for facing external economic shocks with comfort. Yet the Philippines has turned out to be one of the worst-hit countries in East Asia from the coronavirus. Its mortality rate (19.9 per million population, at the time of writing this paper) is comparable only to that of Indonesia, and, on average, almost five times that of other countries in the region. The projected growth contraction in 2020 ( − 8.3 percent) was by far the highest among these countries. The authors set out to examine why this massive growth contraction in GDP occurred against the initial robust macroeconomic fundamentals that permitted the government to predict that, even under the worst possible scenario, the economy could still grow in 2019 and in the medium term by about 6 percent. The paper begins with a stage-setting analytical narrative from a comparative East Asian perspective of the economic conditions of the country in the lead up to and during the pandemic, the humanitarian cost of the pandemic in terms of morbidity and mortality, and the response of the government to cushion the economy against the pandemic’s effects. The authors endorse the view that the lockdown of the economy—via an enhanced community quarantine imposed on the island of Luzon that constitutes 70 percent of the Philippine economy for six weeks and a general community quarantine in the rest of the country—was necessary to hold the pandemic at bay and thus buy time to capacitate the health system to effectively respond to the pandemic. They then convincingly argue, based on a comparison