Sex, drugs and rate cuts

EYES WIDE OPEN - Iris Gonzales (The Philippine Star) - January 7, 2021 - 12:00am

It’s only the first week of the new year, and yet here we are again, unraveling like a magic realism novel. It seems every hour is a page-turner, with so many twists and turns and overlapping genres – horror, mystery and what-have-you.

In this country, matter-of-fact elements mix perfectly with the strange and the bizarre. How, for instance, could the death and alleged rape of a 23-year-old female be declared “solved” when eight of the 11 suspects are still at large? One of the men is said to be a victim himself, also of a sexual misconduct supposedly by a notorious superior in a company not too far or too strange from the female victim’s employer. Quite a small evil circle, it seems.

How about the drugs? That anyone can still access drugs of different sorts shows that the focus of President Duterte’s bloody drug war has been quite blurred, zeroing only on poor slum communities when in-house rich party goers can still access these illegal substances easily.


And then there’s the issue of smuggled vaccines.

Some people in government have already been vaccinated against COVID-19 in clear violations of existing rules. Yet, our leaders say there is nothing illegal about it. Don’t even dare question it, the President told lawmakers in a late-night rant. The highest official of the land is telling the very same people tasked to make laws not to question violations of existing laws. What could be more bizarre?

Where did the vaccines come from? To whom will we be beholden for this unprecedented access? Why do our health authorities delay the signing of agreements with other suppliers in favor of Uncle Xi’s vaccines? Who indeed dropped the ball? And why does the national government insist on centralized procurement even as local government heads want to make their respective acquisitions?

Anyone who can’t smell corruption here must be numb in the nose.

In any case, the government must fix this mess and come up with a better, fair and organized system of providing Filipinos access to safe and effective vaccines against COVID-19.

Massive fiscal rescue

Another strange thing we have been seeing is rising inflation in a low interest rate environment.

Inflation hit 3.5 percent in December 2020, the fastest in 22 months, as food and transportation costs remained elevated. This is higher than the 3.3 percent recorded in November 2020 and 2.5 percent in December 2019.

This brought the 2020 average to 2.6 percent.

And yet, real interest rates have been in the negative territory, supposedly to help the country recover from the pandemic-induced economic recession through higher spending.

But despite the aggressive easing by the Bangko Sentral ng Pilipinas (BSP), credit growth slowed down to 1.9 percent in October as the banking industry’s non-performing loan ratio hit a seven-year high of 3.69 percent that month from 3.47 percent in September.

This shows that we can’t just rely on rate cuts.

But one can’t help but wonder – why is the government seemingly overusing the rate cuts? Is there lobbying from highly leveraged businesses to keep the costs of their loans low? Your guess is as good as mine.

Spend, spend, spend

Clearly, there is a need for more fiscal spending.

Social Watch Philippines said the government has been underspending. There is no time to lose in providing for the needs of the people at the soonest possible time, it said.

Citing data from the Department of Budget and Management, Social Watch said that instead of spending P3.268 trillion from January to September last year, the government only utilized P3.022 trillion or 7.5 percent less than programmed.

Spending growth last year is just the same as in 2019, Bank of the Philippine Islands lead economist Jun Neri further pointed out.

“Spending growth in 2020 will not be much different from 2019 at around 11.5 percent, too small to support an economy down by 10 percent in the nine-month period last year,” he said.

But there are other tools available to the national government, Neri noted.

“It is puzzling why the BSP seems to be overusing the policy rate tool when there are many other tools available especially to the national government,” he said.

There is also a need for government guarantees to make small banks more confident to lend, according to the economist.

“The rate cuts will not be effective if there are not enough guarantees. Almost all our other ASEAN neighbors implemented meaningful government guarantees since last year,” he said.

This would especially help small businesses survive and not be forced to lay off employees permanently.

The BSP is likely to keep the low interest rate regime until the end of 2022 to allow the economy to fully recover from the pandemic-induced recession.

But against this backdrop, the national government also needs to spend more. In this land of the strange and the bizarre, our authorities cannot rely on Filipinos to do the economic pump-priming, not when so many of us are already running on empty.



Iris Gonzales’ email address is eyesgonzales@gmail.com. Follow her on Twitter @eyesgonzales. Column archives at eyesgonzales.com

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