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CORONAVIRUS - The situation in Philippines

1. General situation

The National Capital Region, the provinces of Rizal and Bulacan Laguna and Cavite remain under the General Community Quarantine (GCQ) while Laguna and Cavite also under GCQwith heightened restrictions for the period of July 2021. Please refer to this link for the list of community quarantine classifications for the rest of the country: https://pcoo.gov.ph/news_releases/gcq-status-in-ncr-extended-until-july-31/

The Inter-Agency Task Force for the Management of Emerging Infectious Diseases (IATF) regularly reviews and approves the risk-level of Provinces, Highly Urbanized Cities (HUCs), and Independent Component Cities (ICCs).  See IATF Issuances on changes of Community Quarantine classifications: https://pcoo.gov.ph/documents-issuances/

Restrictions and on-site operations of industry, businesses, public mobility and public transportation capacity are observed in accordance to the stipulated regulations and guidelines of the community quarantine classifications implemented. 

International inbound travel and domestic (intra/inter zonal) movement restrictions in place.

2. Preventive measures

The calibrated approach to the pandemic by means of the implementation of the community quarantine restriction measures is based on risk levels of highly urbanized cities and provinces.

Minimum public health standards shall be complied with at all times. Philippine government mandated all persons to wear full-coverage face shields together with face masks while in public places.  Local governments continue to implement additional requirements to slow the virus’ spread.

The movement of people is still limited. Intrazonal movement of fully vaccinated senior citizens within areas under General Community Quarantine and Modified General Community Quarantine shall be allowed, subject to the presentation of vaccination document(s). Likewise, children five (5) years old and above may be able to go to outdoor areas as defined by quarantine regulations provided that the child is supervised by adult/s.

Limited number of people allowed on mass gatherings, face-to-face or in-person classes shall be suspended. While, alternative work arrangements such as flexible work arrangements, and telework are the practice.

For detailed information on corresponding preventive measures and activities allowed in accordance to quarantine classifications refer https://www.dti.gov.ph/advisories/advisory-no-21-14/

Travel restrictions and Quarantine Protocol

Allowed entry into the Philippines;

  1. Filipino citizens;
  2. Balikbayan under RA 6768 (only nationals from non-visa required countries under EO 408, former Filipino or travelling with Filipino spouse/ parent);
  3. Foreign nationals with valid and existing visa (holders of Special Resident and Retiree Visa (SRRV) or valid 9(a) visa provided that they secure an entry exemption document from the country’s foreign posts abroad prior to arrival to be allowed entry into the country.
  4. Diplomats and dependents can enter the Philippines with a PCR test 72 hours prior to departure, a signed undertaking to commit to 14-day home quarantine and a PCR test on the 7th day of quarantine.

General requirements:

  • Must not come, or must not have travel history within 14 days, from countries not allowed to enter the Philippines[1] except for Filipinos who are part of government or non-government repatriation efforts.
  • Must present a confirmed booking of at least ten (10) days in accredited quarantine hotel/facility, or seven (7) days for travelers who are fully vaccinated and stayed in “green” countries/jurisdiction[2] in the past fourteen days immediately preceding arrival, and will undergo a (RT-PCR) testing on the 5th day of facility-based quarantine. Fully-vaccinated travelers must carry sufficient proof of their vaccination during their travel. Please see guidelines https://pcoo.gov.ph/wp-content/uploads/2021/06/20210628-IATF-RESOLUTION-123-C-RRD.pdf

For further details and regulations updates, please visit: https://immigration.gov.ph/#advisory

[1] Countries are temporarily not  allowed to enter the Philippines until 15 July: India, Pakistan, Bangladesh, Nepal, Sri Lanka, Oman, United Arab Emirates (UAE).

3. Exit strategy

Three pillars that will govern the recovery; 1) calibrated safe re-opening of the economy. 2) the accelerated implementation of the recovery package, consisting of 15 percent of GDP, in terms of fiscal, monetary, and financial resources; 3) the timely implementation of the vaccination program.

Vaccination is crucial in restoring the people’s confidence in resuming economic activities. The national vaccination rollout started in March 2021. As of 13 July 2021, a total of 13.817 million doses have been administered nationwide of which 9.932 million have received the first doses while 3.885 million (about 3% of the total population) have completed the required 2 doses. The adoption of “micro-herd immunity” and “safe spaces” particularly in the National Capital region and major economic hubs as strategies are seen as bridging solutions that would help facilitate the reopening of the economy ahead of achieving population protection and herd immunity for the country’s entire population.  As of this writing, the Philippines is still dealing with 5,000 reported cases daily.

The Food and Drug Administration (FDA) has awarded Emergency Use Authorisation (EUA) to Pfizer-BioNTech, Astra Zeneca, Sinovac, Gamaleya, Bharat Biotech, Johnson & Johnson,  Moderna and  Sinopharm. Novovax (India) has not yet applied for an EUA. The private sector is tapped in the vaccination roll-out. To support the government in its national vaccination program for COVID-19, the private sector through its initiative “Dose of Hope” program committed to shoulder the acquisition of more vaccines to complement the vaccine requirement especially for the private sector.

COVID-19 Vaccination Program Act of 2021 allows private entities to procure vaccines only in cooperation with the Department of Health and the National Task Force Against COVID-19 through a multiparty agreement in order to expedite the procurement and administration of vaccines.

4. Economy

a. Economic impact

The Philippine Gross Domestic Product (GDP) shrank by 4.2% in the first quarter of 2021 extending the recession to five straight quarters as the pandemic dragged on making it the longest recession since the Marcos era. The Philippines’ pandemic lockdown described as one of the longest affected 75% of the economy. In 2020, full-year GDP contracted 9.6%.

Pre-COVID 19, the Philippines is one of the fastest growing economies in Asia with real GDP growth average of 6.3% annually over the ten-year period up to 2019 with private consumption, investment, and services as major growth drivers. The Philippines is about to become an upper middle-income country in 2020 or two years ahead of target.

The reimposition of the strict community quarantine (ECQ) in the National Capital Region (NCR) and major economic hubs in the second quarter of 2021 due to the spike in COVID-19 cases impacted on the economic recovery. The NCR accounts for 37.5% of GDP while the entire Luzon region accounts for about 70% of the country’s GDP. Sectors from retail, real estate, to manufacturing experienced serious challenges due to the enhanced community quarantine.

As of 2nd quarter 2021, unemployment rate stood at 7.7% while underemployment at 12.3%. Private consumption, which makes up roughly 70% of the Philippine economy, has remained muted as public transportation continues to operate on a limited capacity. Policy interventions to stabilize commodity prices have begun to take effect as headline inflation decelerated in June 2021 with headline inflation rate slowed down to 4.1 %. This is the lowest inflation rate recorded since December 2020. Food inflation remained at 4.9 % in June 2021 with the spike in pork prices resulting from the African Swine Fever (ASF) outbreak that significantly reduced domestic pork production.

International  Ratings[1]

The multiple credit raters have adjusted their growth outlook for the Philippines citing the impact of the prolonged lockdown and “sluggish” vaccine rollout.

The IMF lowered its 2021 growth outlook to 5.4% from 6.9%. Moody’s Analytics downgraded it by 4.9% this year, a little slower than the 5.3% estimate. And Fitch expects GDP to grow by 5% and 6.6% in 2021 and 2022, lower than previous estimates at 6.3% and 8.3%, respectively. All these projections are below the 6-7% and 7-9% targets set by the government for the 2021 and 2022, respectively.

The revision of the Philippines’ outlook reflects the increasing risks from the impact of the pandemic and its aftermath on policy-making as well as on economic and fiscal outcome. The pandemic weakened the country’s fiscal position. The Philippines’ general government debt-to-GDP ratio is expected to reach 52.7% and 54.5% in 2021 and 2022, much higher than the 34.1% in 2019 and will exceed the median increase for BBB-rated peers. Fitch Ratings maintained its investment grade “BBB” credit rating.

b. Trade barriers

No import/export restrictions are implemented during the pandemic period.

On the other hand, the importation of health equipment and supplies deemed critical or needed to address the COVID-19 public health emergency shall be exempt from duties, taxes, and fees pursuant to Republic Act No. 11469, otherwise known as “Bayanihan to Heal as One Act”. Import requirements, application and registration process of needed medical supplies, equipment and protective equipment as COVID-19-critical commodities have been streamlined.

Department of Agriculture’s Bureau of Animal Industry issued Guidelines in the Acceptance of Electronic Export Health Certificate/International Veterinary Certificate to facilitate cargo clearance processing.  

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c. Measures for economic relaunch

The Government has put in place a pandemic stimulus program[1] to boost its economic recovery.

The Philippine’s economic recovery program is comprised of a series of legislations. The Bayanihan I, provides emergency support and special powers for the government to swiftly address this crisis. The extension of the Bayanihan to Recover as One Act, also known as Bayanihan II grant the President additional authority to realign funds for pandemic-related expenses to combat the COVID-19 pandemic in the Philippines and provide government funds to stimulate the economy while strengthening the health sector and the government's pandemic responses e.g. provide cash to low-income households and extend credit to small businesses and hard-hit sectors.

The recovery package consists of a combination of fiscal, monetary, and financial instruments totaling about PHP 2.8 trillion or 15.4% of the country’s gross domestic product[2].  The implementation of the economic recovery package is the second component of the three-pillar strategy to facilitate the economy’s recovery by 6 to 7 percent in 2021 and return to pre-pandemic levels by 2022. 

Specific reforms include recently enacted Corporate Recovery and Tax Incentives for Enterprises or CREATE Act, which provides the largest-ever fiscal stimulus package for micro, small, and medium enterprises (MSMEs) in recent history, through a 5 or 10 percentage-point reduction in the regular corporate income tax rate. Meanwhile, the Financial Institutions Strategic Transfer (FIST Act) will allow financial institutions to dispose of non-performing loans and assets to address liquidity concerns of firms.

Apart from implementing the recovery package, the two other pillars to enable the country’s recovery are the safe re-opening of the economy and the timely implementation of the vaccination program. 

Infrastructure program (Build, Build, Build Program) has been reassessed and reprioritized to include more projects that are responsive to addressing the challenges brought by the pandemic. The revised list of infrastructure flagship projects now includes 104 projects under the sectors of health, information and communications technology, power and energy, transport and mobility, urban development, and water resources.

[1] Full report : http://www.neda.gov.ph/we-recover-as-one/

d. Economic outlook

Philippine government is optimistic of the economic recovery in 2021 with a 6-7% growth rate asserting that the country’s solid macroeconomic fundamentals as a result of structural reforms undertaken before the pandemic and the ongoing reform initiatives that prepared the country to address the crisis. This will serve as the starting point of the country’s economic rebound.

The government recognizes the higher risk brought about by the Delta variant thus the vaccination rollout particularly in areas with high infection rates is being accelerated with the expected arrival of additional supply of vaccines to resume more jobs lost to the pandemic. The Philippines is one of the economies most vulnerable to the Delta variant and the country’s low vaccination rate relative to its total population could delay the economy’s recovery.

The government economic team is aware of the risks flagged by the international credit raters on its negative outlook and will continue to exert effort to open the economy safely, manage risks from COVID-19, accelerate vaccine deployment, prudently use fiscal resources, and enact the remaining economic and fiscal reforms to further improve growth prospects.

The negative impact of the pandemic on the economy has been significant but is considered temporary as the Government expects to head back to the road of fiscal consolidation once the virus is contained and public spending normalizes to pre-COVID levels.

e. Short term opportunities

Philippine economy is basically sustained by domestic consumption. One of the first responses is geared towards the rebuilding of the consumer’s confidence and capability. The necessity to support   the supply and production of essential goods is emphasized.

The Government approved the temporary twin measures to immediately address the shortage in the domestic supply and high prices of pork products. The reduction of tariffs and the increase in the minimum access volume (MAV)[1] for imported pork meat products aim to immediately boost domestic supply and temper inflationary effect of high prices of fresh pork as an effect of ASF which decimated a big portion of the local swine industry.

The Philippine embargo on the importation of pork meat and meat products from Belgium due to the African Swine Fever has been lifted in October 2020[2]. As of June 2021, Belgium is the 6th supplier of pork products to the Philippines.

Manufacturing activities show sign of improvement as demand and production picked up with the quarantine relaxation and slow reopening the economy.  Food, beverages, chemical, and health-related products would be at the forefront of the demand.

Digital economy will play a key role in shaping the country’s new normal and offers new opportunities in outsourcing and digitalization. Digital trends have been accelerated by the pandemic as businesses and consumers have shifted to digital transactions. The Philippines has a consumer-driven economy where 70% of economic output is attributed to private consumption. Consumers have turned to online platforms for continued access to products and services as a health safety measure while companies have pivoted their operations and are increasingly harnessing sales and services through online channels. E-commerce growth in the Philippines is driven by “conversational commerce” that drives consideration, improvement in logistics and delivery speed, and businesses looking at consumers beyond their transactions. The growth in e-commerce is a collaboration of creativity, media, logistics, data, and technology.

The Government is investing in digital transformation, a necessary structural reform that will allow the government to provide better and safer services.  As technological innovations are changing the business and industry, digital solutions particularly in the field of e-commerce, healthcare, logistics, supply chain and education will have strong demand.

Infrastructure program has been reassessed and reprioritized to include more projects that are responsive to addressing the challenges brought by the pandemic.   The revised list of infrastructure flagship projects now includes 104 projects under the sectors of health, information and communications technology, power and energy, transport and mobility, urban development, and water resources. The cold chain industry likewise pose opportunities as it is expected to become a P20 billion industry by 2023, led by its core market of food but with new impetus provided by vaccine distribution.

The Government’s focus on enhancing the productivity in the agriculture sector present opportunities. Likewise, ecommerce, digitalization, healthcare, infrastructure and renewable energy lead the sectors showing signs of optimism and lead to long term opportunities following the reopening of the economy.

[1] Executive Order No. 133

[2] Department of Agriculture MO No. 55

f. Long term opportunities

More information on long term opportunities on the country page.

5. Useful links

Government issuances

Health

Trade, businesses, economy

Travel and immigration information

6. Dossier Coronavirus

Het coronavirus heeft een wereldwijde impact, niet alleen op de gezondheid maar ook op de economie. Ook uw export kan hiervan gevolgen of zelfs hinder ondervinden.

FIT monitort de risico's dagelijks en ons buitenlands netwerk informeert u over alle implicaties voor Vlaamse exporteurs op hun internationale activiteiten.

In het dossier Coronavirus vindt u een aantal nuttige tips, adviezen en inzichten in de economische impact van de verspreiding van het virus op internationaal ondernemen.

Met vragen over internationaal ondernemen in tijden van Corona, kan u terecht bij exportadvies-corona@fitagency.be.

16 juli 2021