-16.5%

The economy is now officially in recession. That is not news. All of us expected that.

The news is that the economy contracted by -16.5 percent in the second quarter. That is almost double the decline that most estimates expected.

A -16.5 percent performance is hard to imagine. It is the largest contraction our economy ever experienced since we did economic measurements.

The last major contraction of our economy happened in the third quarter of 1983. In that quarter, the national economy contracted by 10.7 percent.

Those of a certain age remember how dark this period was. There were bank runs and panic buying. Dollars were rationed and there were shortages of everything that required imported inputs. Businesses retrenched workers en masse. Investments were not happening.

I recall the only major investment made in Metro Manila during this period was the construction of SM North Edsa. Everybody thought retail mogul Henry Sy had gone mad.

Deep as our second quarter contraction was, it is only half of the contraction of the US economy. But that is little consolation.

The question now is how the bleeding could be stopped. When an economy is in contraction, small enterprises bear the brunt. They do not have the depth of capital to outlast a period of scarce economic activity. These small enterprises employ the bulk of our workers.

Our trade officials estimate that a quarter of our small enterprises have closed shop. The impact on the employment picture will be immense.

High unemployment translates into lower consumer activity. Producers will sell less. At a certain magnitude, the calamity could cascade.

The larger-than-expected contraction trashes all our economic estimates. The most optimistic forecasts wrote off the first two quarters of the year but expected a recovery by the third quarter. Now, with the disappointing numbers, the greater likelihood is that the contraction could extend to the third quarter at least.

The likelihood is increased by the reversion of the Mega Manila area to lockdown status for at least two weeks. This area creates two-thirds of the country’s GDP.

BSP Governor Ben Diokno tells us that the worst has passed. We desperately hope so. But a lot depends on how the infection numbers run over the next few weeks.

Right now we are caught between rising infection and collapsing economic numbers. We cannot rescue the economy without easing restrictions on movement. But that courts the possibility of runaway infection rates. A strong economy cannot rescue the dead.

Government must find the precise calibrations to enable us to properly thread the needle. We must grow the economy without allowing infections to run rampant.

The magnitude of the April-June contraction simply magnifies the urgency of doing what we need to do.

Corporate abuse

The New York attorney general just filed suit seeking to dissolve the influential National Rifle Association (NRA) over evidence its officers have been using the group’s funds for hiring private jets and enjoying vacations in the Bahamas. It is properly the attorney general’s job to protect shareholders and consumers from corporate abuse.

In our legal context, that task goes to the Solicitor General. Checking corporate abuse was, in fact, the reason given by the current Solicitor General is filing a quo warranto case against broadcast giant ABS-CBN. Eventually, it was the committee on legislative franchises that settled the matter by denying the broadcast giant a franchise.

This is not the first time our legislators, using their exclusive power to issue franchises, acted decisively on complaints of corporate abuse.

Last year, the House did not renew the franchise for Panay Electric Co. (PECO). The company had enjoyed monopoly distribution of power in Iloilo City and environs for nearly a century.

The rejection of a new franchise for the company came after many years of complaints by consumers in the service area, including a resolution issued by the city council no less. Customers complained of inferior service as the local distributor chose to distribute dividends rather than invest in upgrading their facilities.

For decades, Iloilo consumers complained about having to pay the highest rates for electricity service in the country. This even as the Philippines, during these years, had among the highest electricity rates in the world.

Having lost its bid for a franchise, PECO has now come under even closer scrutiny by civic groups for its corporate behavior. Two Iloilo transport groups, for instance, have uncovered documents showing PECO purchased a BMW sedan for the company president using funds intended to acquire service vehicles.

One public interest lawyer in the city claims he found documents showing that in the year 2000, owners of PECO opened three offshore companies in the Bahamas. The implications of doing so are quite serious.

In this age of increased consumer vigilance, corporate abuse can only go so far.

In the case of PECO, Iloilo consumers decided years ago that they have had enough of the power distributor’s poor service. This is why, when PECO’s franchise expired, its unhappy customers made their voices heard.

The power distribution franchise was awarded last year to an aptly named More Electric and Power Corporation.