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Troubled times

EYES WIDE OPEN - Iris Gonzales (The Philippine Star) - January 25, 2021 - 12:00am

It’s unsettling to see the telltale signs of an economy struggling in these deeply troubled times – the closure of Makati Shangri-La hotel, the shutdown of Nissan Philippines’ plant in Laguna, rising unemployment rate, etc.

While we grapple with the health impact of the COVID-19 pandemic, we are also seeing an economic crisis unfolding before our eyes.

As one tycoon told me last year, the economic impact of COVID-19 will be more severe this year, as some business owners are forced to cut their losses and pull the plug on their companies.

The temporary closure of Makati Shangri-La, a business hotel right in the heart of the country’s financial district, speaks volumes on what is really happening to big businesses now.

Come Feb. 1, the glittery and posh hotel will be nothing but an empty edifice, its lights turned down, its doors cordoned off, its employees laid off, until “business conditions have improved.”

Automotive giant Nissan is, likewise, shutting down its assembly plant in Laguna, as did Honda before it and Ford years ago.

Imagine how many employees from Makati Shangri-La and Nissan alone will have to be let go. Imagine how many families will be affected.

Loans

But wait, there’s more.

Some conglomerates are pulling the emergency buttons so as not to default on their loans. Word on the street is that it’s one of the reasons the Bangko Sentral ng Pilipinas increased the single borrower’s limit of foreign banks to 30 percent until March 31, from 25 percent.

This, in essence, allows foreign banks to lend more to companies even as they may have already reached their cap on loan exposures to single borrowers.

Conglomerates, which are still doing good, on the other hand, are seeing their suppliers in a debt crunch and it’s affecting their business process, too, businessmen and some bankers have told me.

Billionaire bank owners are so stressed out these days because of the possible debt defaults of some of their big borrowers.

Fiscal situation

Even our very own fiscal situation is bleak. Succeeding administrations will have to grapple with bigger-than-expected debts.

None of the emergency spending for the health crisis was programmed. Thus, the government needed to bridge the budget gap with additional borrowings.

As it is, the government’s debt-to-GDP ratio will reach 53.5 percent in 2020 from a pre-pandemic target of 40.2 percent and 2019’s historic low of 39.6 percent.

Gross borrowings were programmed to increase to P3 trillion last year, double the pre-pandemic requirement, and triple the 2019 level.

Finance Secretary Carlos Dominguez said we must be prepared for the worst.

“We appreciate the importance of continuing fiscal discipline to ensure the resilience of our economy. The public health emergency could last for months or possibly years. The battle against COVID-19 is going to be a marathon, not a sprint. While we hope for the best, we must be prepared for the worst.”

But, he said, the Duterte administration has “ample ammunition to outlast this enemy.”

This year, the government will have an elevated deficit program of 8.9 percent and gross borrowings will reach P3.03 trillion.

Prices of basic goods and commodities

For ordinary Filipinos without a giant conglomerate to worry about, the anxiety is no different, especially with the skyrocketing prices of food – meat, vegetables, fish and what have you.

A kilo of chicken now costs P170 from just P100 previously. A kilo of pork now sells for P340 to P400 from P160 previously.

A kilo of red onion almost doubled to P200 a kilo this week from P120 previously, while prices of chili soared to P800 a kilo.

Against this backdrop, our authorities and lawmakers are busy with  unbelievably ill-timed matters — a bill prescribing a new way of greeting a person, ending a 1989 accord between UP and the Department of National  Defense, and endless politicking.

There is so much that needs to be done and I hope our leaders find inspiration in the story of America when it decided to move forward to create a much better tomorrow.

We don’t need more divisiveness and polarization. We need serious policies that will help our country move forward. We need inclusive growth and not just a few sectors’ growth. This means more projects, faster release of relief measures and additional spending from the government, directly to the pockets of beneficiaries.

As it is now, our economy will take years to recover. More businesses will close, that’s for sure. More Filipinos will lose jobs and the unemployed may stay unemployed for a while. Nissan Philippines may not be the last manufacturing plant to shut down. Makati Shangri-La may take a while to reopen, if it does.

Times are bleak indeed and, unless our authorities act faster to arrest the economic decline, we might yet see the total carnage of our now fragile economy.

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

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