Forecasting in a time of radical uncertainty (2)

PHILIPPINES - In Brief 18 Mar 2020 by Romeo Bernardo

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On Monday, as it became evident that putting Metro Manila on lockdown was not going to significantly limit the movement of people, President Rodrigo Duterte, upon the recommendation of health officials, expanded the lockdown to the entire island of Luzon, imposing strict home quarantine on all households, at the same time, suspending all public transport systems and closing down private establishments except those providing basic necessities, including health-related outlets, groceries and supermarkets and banks. Also allowed to continue operating are export-oriented firms, including the business process outsourcing sector, while movement of goods will remain unhampered. Additional permissions followed a day later, including trading in capital markets, deliveries of food and medicines, and easing of restrictions for outbound international passengers, including overseas workers.Considering the limited supply of testing kits when local transmissions began multiplying early this month, the lockdown appears to be government’s only avenue to “flatten the curve” of daily infections and reduce the stress on local health facilities. As of today, 202 people have tested positive for covid-19, with 17 fatalities and 7 recoveries.Clearly, it is not possible at this time to quantify the cost of the lockdown. The assessment of the BSP governor of quarterly activity, taking note that the lockdown straddles the end of Q1 and start of Q2, is as follows: if it succeeds, the economy is in for a sharp V-shaped rebound; if it fails, the cost could be “large and protracted” with the recovery taking an elongated U shape.This uncertainty on the adverse impact of the local lockdown is compound...