Swoosh

BSP Governor Benjamin Diokno forecasts the Philippine economy will experience a swoosh-shaped recovery, the charts eventually resembling the logo of the Nike sports brand.

That is a hopeful but brave projection to make. After all, the turn of all things will be at the dictate of a virus that seems to have evaded all efforts to suppress it. We could spend the next few years chasing after every outbreak of infection.

Right now, there are reports of new outbreaks in countries that were supposed to have successfully suppressed the spread of infections. These outbreaks happen in the Eurozone, in Japan, Australia and South Korea. They happen in countries considered first-rate in their response to the pandemic such as Taiwan and Vietnam. Taiwan reports four of the five new infections were from people travelling from the Philippines.

The more cautious projections across the globe say we will need much of the next decade nursing the global economy back to where it was in January 2020. Even the US Fed appears to have abandoned its confident June projection of a V-shaped recovery.

This happens in the face of a tsunami of new infections in most states and the possibility of a return of some to lockdowns that will suppress economic activity. Many fear what might happen in the coming fall and winter when the resistant virus comingles with the seasonal spread of flu cases.

In the works at the US Congress is a new trillion-dollar stimulus bill intended to revive the world’s largest economy. But this might not be enough to reverse the job destruction that happened the past few months.

Major airline industries, forced to restructure their debt in the face of the major slump in travel that was happening since March, estimate that passenger volumes will not return until 2024. That is an indication that most enterprises do not expect a substantial return of business over the next two years.

The adverse economic consequences of this pandemic will linger on for years, not months. We need to wrap our minds around that prospect.

As of end-June, our national debt climbed to P9.05 trillion. This is up 1.8% over the May number, reflecting the emergency borrowing the Philippine government had to undertake to meet the health crisis.

The emergency spending done since last March forced government to incur a much larger deficit. The first of the emergency borrowing we made was for budget support. That means they cover money already spent.

Our Congress appears ready to pass a P140-billion Bayanihan II spending bill. That is a prudent amount. It does not seem large enough to revive the domestic economy. Much of it will be spent beefing up our health system that has been pushed to its limits by the surge in infections.

Sen. Imee Marcos described the Bayanihan II package as “kuripot.” That might be true. But it is all we can afford. Our sources of credit are not bottomless and the revenues our government hopes to collect will be much lower than last year’s.

While we can surely borrow more, given headroom created by the reduction in outstanding debt we achieved before the pandemic, it might be reckless to do so. The repayment could prove a drag on our growth for a generation to come.

Our Congress is barred from allocating money whose revenue sources are unproven. This is a prudent restraint. The US Congress is under no such restraint. Deficit spending in the American system is simply an accounting entry.

Earlier the House of Representatives toyed with a much larger figure: about P1.4 trillion. This “stimulus” package was, in the main, composed of small spending projects. That is suspicious in the face of it. The Department of Finance described the exercise as “unfundable” and reminded that congressmen of the constitutional restraint on appropriating money from unproven revenue sources.

There appears to be limited advantages in the BSP injecting more liquidity into the market through bond purchases. Our banks are awash with cash. The challenge is to find worthy borrowers who could prove profitability in these uncertain times.

It does not seem likely as well that we could jump-start our domestic economy on the basis of investment inflows.

The Philippines receives the smallest share of direct investments coming into Southeast Asia. Hot money has left our stock market, causing it to shrink. Those untenable limits on investments need to be cleared if we aspire to benefit from any of those investments fleeing China.

Our attractiveness as an investment destination has been limited for years because of poor infrastructure and insane constitutional limits on foreign participation in our economy. It will take us years to clear these factors.

Then, of course, we can rely on the so-called “low-hanging fruits.” Among these would be reopening the mining operations shut down during the time of Gina Lopez. Although mineral prices are depressed during this moment of global recession, they will at least produce some amount of dollar-earning exports – at the very least to offset our oil imports.

We are expecting a decline in remittance inflows because of market conditions. At the moment the more immediate concern is to repatriate our distressed migrant workers.

The economic headwinds we face are strong. Over the coming period, we will try and lift our economy by its bootstraps. Our consumers can contribute to the effort by consciously choosing to support our small producers in making their purchases.

We all desperately want to share Ben Diokno’s optimism in a swoosh-shaped recovery. But it is hard to imagine it.