Stimulating the economy

It just took two months to drive our economy to the ground and empty our national treasury, and the Chinese Wuhan virus isn’t done with us yet. Indeed, last week, we had the highest growth in the number of fresh cases nationwide, second highest in ASEAN.

But it doesn’t look like the government will revert to a tough community lockdown again. At least that’s what government officials are saying, except for the President who is keeping his options open.

The message has finally creeped into the consciousness of our leaders that killing the virus shouldn’t mean killing the most vulnerable Filipinos of hunger. There is nothing more the Treasury can spare in terms of direct cash assistance if another tough lockdown is resorted to.

Unfortunately, it is really all up to everyone to protect themselves from infection even while doing things one does everyday to earn a living.

Staying in a high state of paranoia, which is to consider every person one meets as a potential virus carrier, is the only way to survive. Wear masks. Wash hands frequently. Avoid crowds, specially crowded indoor activities. Practice social distancing always. Beyond these, pray.

Reviving the economy also requires a lot of prayers. There is no doubt that many small and medium sized businesses will go under. Some big businesses may downsize. OFW remittances from abroad will falter. BPO earnings are threatened but are still holding on.

Beyond fresh capital, one needs a good imagination on how to navigate the so-called “new normal.” Restaurants must reconfigure their business to prioritize take outs. Many offices must make working from home more productive.

The property sector seems to be in mild panic. No one is buying property these days. I am getting more unwanted spam text messages selling real estate properties, mostly Ayala’s. I wonder how they get my name and mobile number. Hopefully, their sister companies are not throwing privacy guarantees out the window in this emergency.

On big picture economic policy, there is an ongoing debate between the DOF and some members of Congress on the size of additional stimulus the government must make available to revive the economy. Congress is talking P1.3 trillion, a gargantuan amount that Finance Sec Sonny Dominguez thinks is unconstitutional.

Any stimulus package, Sec Sonny says, should be funded by government savings, not by new borrowings.

“The Constitution says, we cannot have a supplemental budget that is not supported by additional revenues, or savings,” Dominguez said, as he clarified that “loans do not qualify as additional revenues or savings.”

Of course, it would be easy to borrow at favorable rates, the Finance Secretary said, given our favorable credit rating. But….

“Let me just tell you that this administration has borrowed the most amount of money in any five-month period compared with any administration in the past,” Sec Sonny said.

I guess the other thing that worries Sec Sonny is leakage in another gigantic government dole out. The recent one isn’t even all done, but the DILG has started, suing LGU officials suspected of dipping their dirty fingers in the funds and denied help meant for our poor.

Perhaps, if we have the National ID and a reliable digital infrastructure, it would be easier to make sure the money gets to the right people. But we won’t have that for a while. Directly putting money in the hands of the poor to stir up demand is a great economic stimulant and supports social justice objectives.

The other concern is, stimulus assistance to businesses will end up helping the big guys more, like the airlines who are capable of helping themselves. There is no program or a credible system that will make sure small and medium enterprises will get the bulk of assistance.

It is very easy for some economists to say we need trillions of pesos doled out to revive the economy. That’s theoretically true. John Maynard Keynes said the government must create purchasing power and jobs by, among others, spending big building infrastructure to stop the economy’s free fall.

But the dangers of having so much money ready for dole out being lost is a reality that must be addressed. If that happens, our borrowed money will only stimulate the bank accounts of some of our corrupt leaders. Our borrowed money will unlikely go to those in real need.

As they are rushing programs and budgets for the SONA towards month’s end, they have to think of several generations of Filipinos who will be obligated to pay a giant debt. Programs may seem well intentioned, but let us not forget the salivating congressmen lusting for pork barrel funds they embedded in those programs!

As for the feared economic freefall, here is what former BSP deputy governor Diwa Guinigundo wrote in our sister publication, Business World:

“No freefall, but we face a conditional proposition. The Philippines has all it takes to recover and grow. But we caution against four handicaps.

“First, there is the headwind of inefficient public health management – among them, lapses and delays in testing, tracing and treating.

“Second, there is the danger of uncoordinated public policies that must be consistent and complementary across all agencies and branches of government. We really must heal as one.

“Third, we have a risk of ‘democracy deficit’ when public support is not rallied as government actions may not be believed to be credible or consistent.

“Finally, we cannot discount the uncertainties of the times due to the pandemic itself – these are uncertainties best addressed by science, research and medicine.

“If we allow these four to run wild, the global freefall might hit us all.”

Unfortunately for us, all those points require good governance, something we would be foolish to expect in the last two years of the Duterte administration. Sec Sonny Dominguez and Sec Karl Chua can only keep their fingers in the dike for so long.

They have the best plans, but with a Congress of ignorant populists like what we have now, fervent prayers are our only hope for salvation.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco