The region’s poor and working classes are bearing the brunt of economic fallout from the latest wave of COVID-19. Long-term social protection schemes could help reduce impacts moving forward.
By Zachary Frye
A surge in COVID-19 cases across much of Southeast Asia has put the brakes on the region’s emerging economic recovery. Since the latest wave of infections hit in mid-April, many ASEAN nations have seen a significant increase in case numbers and deaths.
Cambodia also saw an April surge, leading to a three-week lockdown in the capital Phnom Penh that left many struggling to access necessities like food.
At least 3.4 million Filipinos remain out of work as the most recent virus surge led to an extended lockdown in much of the capital and surrounding provinces. Parts of the country have been in various states of lockdown since March 2020—one of the longest lockdown periods in the world—although the latest restrictions in Manila were eased on May 14.
Though the jobless rate in the Philippines fell from a high of 17.6% percent in April 2020 to 7.1% in March 2021, the country’s economic outlook is still among the bleakest in the region, especially for the working classes. Its unemployment recovery rate remains the worst among emerging economies in Asia, leaving many with reduced or nonexistent income opportunities.
For some families in Manila, the economic disruptions are leading to dire circumstances. “Sometimes at night we don’t have anything to eat, we can only wait for the next day,” local resident and mother of nine Mona Liza Vito told CNN Philippines in a recent interview.
According to a government survey released in April, an estimated 6 out of 10 Filipinos experienced some form of food insecurity in the later part of last year.
Virus surge cripples emerging economic recovery in Southeast Asia
Before the latest surge in COVID-19 cases, ASEAN economies were generally benefiting from reduced lockdown measures: the six biggest economies in the region all saw a sustained increase in GDP from 2020 lows by the third quarter of last year.
The Philippines remains the slowest in the region to recover as its economy continued to shrink in the first quarter of 2021.
Others are also navigating prolonged uncertainties. Following a 6.1% economic contraction in 2020, Thailand now faces reduced consumer confidence and consumption as it contends with its most severe virus wave.
Prior to Thailand’s “third wave”, some were expecting a recovery to pre-pandemic economic output by 2022. But economic growth forecasts in Thailand have been subsequently reduced by at least .3% over the course of the year, with some estimates claiming 100 million baht (approx. US$30 million) per month in potential losses.
In Cambodia, meanwhile, the Asian Development Bank expects positive economic growth throughout 2021, but warns that an uneven recovery will continue putting outsize economic pressure on many households.
A World Bank report released in April claims that China and Vietnam are the only countries in Asia on track for rapid economic recovery, meaning much of the region’s poor will continue facing significant levels of economic uncertainty.
At the time of the report’s release, the World Bank’s vice president for East Asia and the Pacific said that the economic shock caused by the COVID-19 pandemic “has stalled poverty reduction and increased inequality.”
Data from the report indicated that 2020 was the first year in decades in which poverty stopped declining in the Asia-Pacific region. The report also claimed that some 32 million people across Asia who were on track to escape poverty in 2020 were unable to due to impacts of the virus.
Charities are helping bridge the gap left by inadequate government relief programs
Due to the increase in cases, some governments are implementing further spending programs aimed at alleviating economic pain among the poor.
The Philippines’ House of Representatives passed a bill that would implement a third installment of virus relief payments while Thailand’s cabinet recently approved a 700-billion-baht (US$22.4 billion) loan aimed at revitalizing the economy.
In early May, the Thai government announced an extension of its handout scheme aimed at supporting 32.9 million Thais with an extra 2,000 baht (approx. US$60). The government also approved budget to continue a co-payment scheme for many Thais that pays for half of general purchases up to 150 baht (US$5) per day and an e-voucher plan aimed at middle-income earners.
Budget concerns coupled with government inefficiencies, however, continue to hamper the programs’ effectiveness. Thailand’s government debt sits at 58.6% of GDP, just under the 60% threshold ceiling that some fiscal experts say is the limit for budgets to remain sustainable.
For the Philippines, previous payment schemes known as Bayanihan 1 and 2 have supported at least 18 million low-income Filipinos with payments of 8,000 pesos (US$166) per month, yet many are still struggling to pay for basic necessities.
Filling in the gaps, charities across the region are helping bring much-needed food and basic supplies to some of Southeast Asia’s poorest communities.
In Thailand, a charity called Bangkok Community Help is organizing handouts of food and necessities in the capital’s low-income Khlong Toey neighborhood, which was hit with a cluster of virus cases earlier in May.
Since the latest virus surge, the organization has given out daily care packages and donated over 41,000 hot meals in May alone.
In the Philippines, meanwhile, a local woman in Quezon City set up small stall in mid-April which she dubbed the Maginhawa Community Pantry, with a sign that read “give what you can, take what you need.”
The pantry quickly became popular on social media. Inspired by the woman’s resolve, Filipinos began sending donations from across the country and established over 400 copycat stalls.
The case is growing for increased funding towards social safety nets
According to Anne Booth, an economist with SOAS University of London, the economic fallout of COVID-19 in Asia could have continuing consequences for poverty in the region.
She claims that although much of the increase in poverty has been centered in urban areas, the virus has exposed clear weaknesses in social services across the region that will impact the poor everywhere moving forward.
Economic protection programs have helped blunt increases in poverty in ASEAN countries, yet many citizens are still struggling to make ends meet. In Thailand, despite three phases of stimulus packages worth over US$63 billion in total, 1.5 million Thais fell into poverty in 2020—an increase of over 40%.
Although governments need to consider budgets when outlining spending priorities, the case for increased social protection in the region is strong, especially as fragile economies start moving towards recovery.
For UNESCAP, an arm of the United Nations focused on the Asia-Pacific region, universal protection floors implemented on a permanent basis in Southeast Asia could help governments build resilience to future social and economic shocks such as those stemming from pandemics.
UNESCAP also argues that the increases public spending necessary to achieve these goals are significant but affordable over the long term and that sustained programs would help meet protection gaps that often affect the most vulnerable.
As vaccination drives across the region are set to get started in earnest in the second half of 2021, governments are in a position to start looking forward to more stable economic conditions. With a focus on long-term protection schemes, leaders could further mitigate economic fallout from future crises.