Businesses, consumers urged to spend more

To help economy

MANILA, Philippines — Regaining the confidence of businesses and consumers to spend more is necessary to help revive the pandemic-stricken economy, according to the Bangko Sentral ng Pilipinas (BSP).

Dennis Lapid, director of the BSP’s Department of Economic Research (DER), said businesses and consumers need to spend more to revive the economy that slipped into a recession in the second quarter.

“I think in central banking, we also like to say that monetary policy cannot push on a string, meaning that no amount of monetary easing or liquidity injection can push businesses and consumers to spend if the confidence is not there,” Lapid said.

The country’s gross domestic product (GDP) contracted by nine percent in the first half, prompting economic managers to set a deeper contraction target of 5.5 instead of two to 3.4 percent for this year. The economy expanded by six percent last year.

The Philippines slipped into recession with a record 16.5 percent GDP contraction in the second quarter due to the containment measures to slow the spread of the virus.

Lapid said the government needs to strengthen fiscal stimulus, as well as the country’s healthcare system.

BSP Governor Benjamin Diokno said earlier monetary policy is not ‘’the only game in town.’’

“It is important to remember that this particular crisis is also unique in the sense that it is primarily a shock to the health system,” Lapid said.

Lapid also said the response of the government has different components, starting with the health component involving the strengthening of the health system and implementing testing and contact tracing.

Lapid also cited the fiscal component being finalized by the legislators and the national government.

The BSP was forced to postpone the surveys pertaining to the outlook of Filipino consumers on the country’s future economic conditions as well as the overall sentiment and prospects of the businesses in the second quarter due to the lockdown.

The central bank, however, has resumed both the Consumer Expectations Survey (CES) and the Business Expectations Survey (BES) for the third quarter.

Filipino consumers turned less optimistic as the confidence index for the second quarter based on the first quarter 2020 CES declined to 9.2 percent from the previous quarter’s 15.7 percent and for the next 12 months to 19.9 percent from 26.4 percent.

On the other hand, business confidence based on the first quarter 2020 BES plunged to the lowest level in a decade with the confidence index hitting 22.3 percent in the first quarter from 40.2 percent in the previous quarter.