The other manufacturing, retail-wholesale trade, and government services are the top three economic sectors that are critical during the pandemic, based on a study on “Mitigating Economic Losses from COVID-19: Insights from Input-Output Analysis,” which was presented in a webinar on “COVID-19: Where We Are and Where We Want To Be.” The research looks at the economies of both Malaysia and the Philippines.
Analyzing the five factors: economic impact, connectivity, sector size, income multiplier, and employment, the researchers identified the critical sectors for the economies of both countries. The mathematical models they developed to account for network effects, where changes in a particular sector cause “ripple effects” in other sectors of the economy.
“When a firm goes bankrupt, it disappears from the economic picture. The question is, how far below normal can a certain economic sector dip, because percentage-wise, below a certain threshold level, bouncing back to pre-pandemic level becomes difficult or even impossible,” Raymond Tan, a professor at DLSU and member of the research team, said.
Tan illustrated that economic sectors are not monolithic entities, but consists of individual firms. In a given crisis like a pandemic, what happens for instance, in hotels and restaurants, is that these large numbers of corporate entities might end up going bankrupt because of the percentage loss of business, and it is this percentage or fraction of loss that is significant.
The tourism and travel industry are among the extremely hard-hit sector this pandemic, but sectors such as telecommunications, finance, logistics and delivery are booming.
The enhanced input-output model of analysis can help the government identify the critical economic sectors to be prioritized so that given the limited resources, the government would know where to distribute the stimulus package across sectors of the economy to maximize the benefits. This model has developed by Krista Danielle Yu, another member of the research team for the Philippines’ side.
The team presented several scenarios for computer-aided allocation of economic stimulus, a scientific approach to maximizing the social benefits per Peso spent. Effective exit strategies are needed to revive economies during the COVID-19 pandemic.
The Philippine economy has been doing good, due to sustained decades-worth of over 6% growth in GDP. However, there’s been a 16.5% contraction during the second quarter of the year because of the pandemic. Compared, though, with Malaysia’s drop in GDP by about 20% during the lockdown, the country fared slightly better.
“There will be limited resources, but with the use of computer models and with the best available techniques, we can make better decisions and restart the economy in the best way possible,” Tan said, acknowledging the importance of scientifically-based policy support for planning in the government, which has been what the Department of Science and Technology has been doing.
The research was based on outputs from a project supported by a special COVID-19 grant from Heriot-Watt University’s Global Challenges Research Fund (CGRF). The project involved a team of researchers led by Dr. VikneshAndiappan from Heriot-Watt University Malaysia, University of Nottingham Malaysia, and De La Salle University.
For more scientific-based discussions on COVID-19, the public can go to the Facebook Page, NAST PHL of the National Academy for Science and Technology (NAST), an agency of DOST.(Geraldine Bulaon-Ducusin, DOST-STII)