Economic Impact of Covid-19 | Part 5: More Numbers

By Art Jimenez

Impact on Remittances

In January this year, our OFWs remitted $2.7 billion to their waiting families and relatives. Almost the entire amount, or $2.1 billion, was remitted by land-based OFWs and the balance, $0.6 billion by the sea-based workers.

The $2.7 billion total is higher than the four-year average from 2016 to 2019. However, Covid-19 started to wreak havoc on the Philippines and the world not in January 2020 but by March.

It is highly likely that the worse impact of Covid-19 on OFW remittances will be felt starting April or May. The Bangko Sentral ng Pilipinas keeps tab of the OFW remittances.

Deferring to the financial damage the virus could cause, Bangko Sentral Governor Benjamin Diokno has already reduced the Bank’s forecast in remittance growth this year from 3 to 2 percent.

Remittances in 2019 totaled US$30.1 billion or 4.2 percent higher than the $28.9 billion year-on-year.

It is a given that reduced OFW income and remittances will cascade to people’s consumption patterns and expenditures.

 

Impact on Consumption

The quarantine, particularly the enhanced one that covered Luzon, put out of work untold hundreds of thousands (even a million) the gainfully employed, thriving MSMEs (see Part 4), informal entrepreneurs (i.e., unregistered micro businesses) and basically zippered their wallets.

Also badly bruised are the loving beneficiaries of our hardworking OFWS many of whom have either been dismissed from their jobs or retained at lower salaries due to the economic slowdown caused by Covid-19. Their reduced income certainly impair their living standards wherever they are abroad and their beneficiaries here in the Philippines.

Two major, major outcomes are almost, if not downright, inevitable.

One is lost income. Under the Covid-19 regime, this means instant poverty and inability to buy things a family is used to having and enjoying under normal circumstances. Household purchases of non-essential commodities (like alcohol, tobacco, garments, furniture and furnishings, recreation, dining in hotels and restaurants and travel [tourism]) are beyond reach as the establishments selling them are padlocked! They have almost nothing to spend anyway. Whatever savings the family has is spent for food and medicines. Ergo the need for the government SAP or Social Amelioration Program.

And two. The companies that are locked down naturally cannot ring up sales. No sales translates to no taxable income, and therefore, no tax due to the BIR. No wonder our fiscal position (i.e., government finance) is also in dire straits.

Impact on Government Revenues 

What was mentioned in Part 4 of this series is worth repeating and adding to.

Due mostly to the Luzon ECQ, the BIR and the Bureau of Customs (BOC) collected only P600.96 billion during the January-March 2020 period. This was P231.3 billion or 20.6 percent short of its tax goal of P757.12 billion.

The BIR accounted for P455.45 billion or 75.8 percent of the total tax take of P600.96 billion while the BOC brought in the remaining P145.51 billion or 24.2 percent.

For the month of March, when Covid-19 was on its way to a speedy rampage, the country’s two biggest tax revenue raisers hauled in a combined P163.2 billion, which was just two-thirds of their P248.5 billion goal.

The massive tax take shortfall is due to the size of Luzon and what composes it. Remember that Luzon (which includes the National Capital Region) accounts for 72 percent of the nation’s total domestic output.

As mentioned in Part 2 of this series, Luzon is composed of 8 regions with 38 provinces and 699 towns, and 72 cities (including NCR’s 16 cities). Luzon (with NCR) is responsible for 72 percent of our national gross domestic product (GDP).

To be Continued