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Save the economy

save the economy - Save the economy

parachute container PHL - Save the economyOur economic managers had done a fairly good job until the pandemic struck. Although economic reforms towards improving the business climate and attracting foreign capital have been few and far between, they nonetheless managed to eke-out GDP growth of 6.4%, on average, in the last four years. Inflation was tamed, debt levels were controlled and poverty rates were declining.

But the economic team seems to have lost its way during the pandemic. In the early days of the quarantines, the Department of Finance (DoF) announced that the economy could still grow by .08%. A month later, it adjusted its forecast to -3.4%. In September, it adjusted its prognosis yet again to -6.6%. The frequent adjustments suggests miscalculations and a poor grasp of the situation, however volatile it may be.

In a webinar entitled “Philippine Economy Bounce Back Plan,” I distinctly recall being assured by the National Economic and Development Authority (NEDA) and the DoF that a V-shaped recovery was to be expected. The sharp recovery was said come on the back of the combined effects of increased infrastructure spending that would start in the third quarter, coupled with the pump-priming effects of a hefty stimulus fund.

Well, the Department of Budget and Management just announced that infrastructure spending actually plunged by 33% in the third quarter. This, coupled with the lockdown in August, resulted in the economy contracting by a massive 11.5%. Seems like NEDA and the DoF miscalculated infrastructure spending too.

With disappointing third quarter results, the Philippines is now infamous for clocking-in the most severe contraction in the region at 10% for the first nine months of the year. At the rate things are going, it is highly unlikely that the -6.6% forecast of NEDA will not be attained. The IMF’s prediction of an 8.3% contraction seems more accurate. Either way, the Philippines will be the worst performer in ASEAN and among the worst in the world for 2020.

As if this were not bad enough, the DoF had appropriated the smallest stimulus fund in the region at only 5.88% of GDP. For context, the stimulus funds of our neighbors are at 10% of GDP for Vietnam, 18% for Indonesia, 22% for Malaysia, and 26% for Singapore. With this, we can expect our economic recovery to be the slowest in ASEAN. Even Bangko Sentral ng Pilipinas Governor Ben Diokono admits that it will take two years for the economy to approximate 2019 levels. With this, the country will fall further behind the region’s development race. How sad for us.

It is said that the DoF’s hesitance to increase the stimulus package stems from its aversion to acquire more debt since doing so may compromise our credit rating score. The last thing this administration wants is to end its term with a credit ranking lower than what it inherited. In other words, the decision to keep the stimulus package to a bare minimum is, in some part, motivated by politics, vanity, or both.

The lack of an appropriate response to the economic crisis has caused civil society to rise up and take action. In a simple ceremony, the Concerned Medical Doctors and Citizens of the Philippines (CDCPH) was recently formed with the purpose of asking the government to transition from a lockdown strategy to a focused protection strategy. The shift is a designed release of many parts of the economy from constriction. CDCPH President, Dr. Benigno Agbayani (Chairman of Orthopedics at the Manila Doctors Hospital), asserts that there is no need to uselessly repress our already battered economy by imposing excessive restrictions. There is room to relax and we should take advantage of it to allow the economy to recover.

The CDCPH has made representations to the Inter-Agency Task Force for the Management of Emerging Infectious Diseases  (commonly referred to as simply IATF) but it fell on deaf ears. It seems the IATF is not open to suggestions even if its militaristic antivirus response has already wrecked many parts of the economy without significantly controlling the virus’ spread. Hubris is a terrible thing.

Since the IATF refuses to grant an audience to the CDCPH, I will instead cite some of the CDCPH’s recommendations in this piece so that the public may know.

First among the recommendations relates to transport. As we all know, public transportation is the veins of the economy. If it is curtailed or blocked, commerce cannot flow. To this end, the CDCPH proposes a sensible system to restore 100% of public transportation capacity whilst still maintaining safety protocols.

Two lines are recommended for queuing and ticketing — one for the elderly, vulnerable and immunocompromised (known as EAVs) as well as people living or exposed to EAVs (known as PLEAVs), and the other for the general public.

Seating restrictions in public transportation will depend on whether there is a spike in infections and the available capacities in hospitals. If hospitals are operating at 75% of maximum capacity, transport shall exercise a strict one-seat-apart rule. If hospitals reach 90% capacity, then EAVs will not be allowed to use public transport. Other than that, buses and jeeps should be allowed to operate at 100% capacity for so long as there are plastic curtains between seats and strict mask wearing is enforced.

When it comes to public venues like markets, commercial centers, churches, and recreation facilities, the CDCPH recommends that special designated areas and/or time periods be made available for EAVs and PLAEVs. Other than that, public spaces should be allowed to operate at full capacity with proper mask wearing.

On traveling by land across borders, Dr. Agbayani argues that the virus is already endemic in most parts of the country and is present in our soil, sewers, and atmosphere. That said, road barriers and checkpoints are futile. To limit intercity or provincial travel, at this juncture, only disrupts supply chains. Road boundaries across the LGUs should be removed.

As for curfews and capacity control, the CDCPH maintains that setting time limits on business operations and curtailing capacities of commercial establishments does more economic damage than good in avoiding infections. Experts around the world say that for as long as mask wearing, hand washing, and social distancing are observed, the virus spread can be minimized, regardless of time and level of fullness of a commercial establishment.

Civil society is deeply concerned about the state of the economy and its poor prospects of recovery. We hope these concerns are taken into consideration by the authorities.

 

Andrew J. Masigan is an economist

andrew_rs@yahoo.com

Twitter@aj_masigan

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