Philippine Central Bank Chief Warns Covid Resurgence Will Worsen Global Economy

Benjamin Diokno, who leads the Philippine Central Bank, sat down at a virtual panel during the Milken Institute Asia Summit in early December 2020 with a sobering message: the world's economic troubles were about to get worse before they got better. The fresh wave of Covid-19 cases sweeping through Europe, the United States, and pockets of Asia would drag down global growth in the months immediately ahead, he said. The International Monetary Fund had projected in October that the world economy would shrink by 4.4 percent that year—a figure Diokno considered optimistic. He expected the final quarter of 2020 and the opening months of 2021 to underperform even that grim forecast.

The timing of his warning was peculiar. Just days earlier, the United Kingdom had begun vaccinating its population outside of clinical trials, a milestone that sent investors into a more hopeful mood. Markets had warmed to the idea that relief was coming. But Diokno saw a gap between hope and reality. The vaccines existed now, yes, but their economic benefits would take time to materialize. In the interim, the virus was still spreading. Japan and South Korea, two of Asia's largest economies, were both experiencing fresh surges in cases. Across the globe, Johns Hopkins University's tally showed more than 68 million confirmed infections and over 1.5 million deaths. The United States, India, and Brazil accounted for the largest share of both figures.

What made Diokno's assessment noteworthy was not that he was predicting recession—that was already widely understood by December 2020. Rather, he was suggesting the IMF's own projections, which had already been revised upward from an even bleaker June estimate, still did not capture the full depth of the near-term downturn. The deterioration he saw unfolding was real and measurable, not theoretical. Europe and America, the world's largest economies, were in the grip of winter waves. The damage would ripple outward.

Yet Diokno was not entirely pessimistic about what lay beyond that immediate horizon. Once vaccines began reaching populations in meaningful numbers—once the inoculation campaigns moved from symbolic first jabs to mass deployment—the outlook would brighten considerably. He expected 2021 and 2022 to offer genuinely improved prospects for growth. China, which had moved faster than most countries to contain the virus, would likely lead Asia's recovery, he suggested. Asia as a region, in turn, would probably outpace other parts of the world in bouncing back.

The picture Diokno painted was one of a near-term valley followed by a climb. The fourth quarter of 2020 and the first quarter of 2021 would be the trough—worse than forecasters had anticipated. But the vaccine rollout, already underway in Britain and soon to expand globally, represented the turning point. The question was not whether recovery would come, but when it would arrive and how steep the climb would be. For now, the world had to endure the worst of the pandemic's economic fallout before the benefits of vaccination could be felt.