Strong antidote needed for the economy

Metro Manila’s streets are now empty and eerily quiet, devoid of that pulsating and chaotic vibe. Gone are the honking of jeepneys, the monstrous traffic jams and the rush-hour mayhem. Hotels are closed. Airlines are grounded. Restaurants are empty and those friendly neighborhood sari-sari stores are locked. 

Indeed, what was once busy and vibrant is now a giant empty capital region, no thanks to the killer coronavirus disease or COVID-19 that has led to a pandemic.

Not knowing how or when this will end adds to the uncertainty, but the aftermath of this nightmare will be just as scary. 

Some businesses, big or small, may not make it to a post-COVID-19 future. There are companies that may start declaring bankruptcy or filing for rehabilitation months after this is over. Debts will pile up and banks, saddled with unpaid loans, may be afraid to lend more.

New hotels and condominiums that are under construction may be put on hold. Buyers will not get their investments back anytime soon.

If big businesses suffer, more so will the smaller companies which have weaker balance sheets and not enough buffer to cushion the impact of a crisis. 

The inevitable will happen. Some may start downsizing and thousands, if not millions of Filipinos, could lose their jobs. Dollar remittances from overseas Filipinos are sure to dwindle as the global economy slows down. 

I don’t want to be the doomsayer, but this is, indeed, the reality we need to prepare for.

The Philippine economy will surely take a hit and the already-wide income inequality in the country will widen all the more. 

As the country grapples with the rapid increase in COVID-19 cases, our economic managers need to keep the economy running. 

The Inter-Agency Task Force for the Management of Emerging Infectious Diseases issued a joint resolution providing for social amelioration measures during the quarantine. This is crucial and it is very much a welcome measure. 

However, the government also needs a massive economic recovery plan and, more importantly, we should not lose sight of the long-term goal: sustainable and inclusive growth. 

The Bangko Sentral ng Pilipinas already announced that it would purchase P300 billion worth of government securities to support efforts to contain and recover from the COVID-19 pandemic.

Maximum fiscal response

Now, the government needs a maximum fiscal stimulus response to help businesses cope. 

For big businesses, on which tens of thousands of jobs rely on, the government needs to be ready with a lifeline. This can be in the form of government-backed loans or grants. 

Remember, as the Lehman Brothers  collapse has taught us, nothing is too big to fail. This means that even the giants can crumble and the repercussions on the economy will be just as big — job losses, systemic risks and negative domino effect on downstream industries. 

Aside from support for big businesses, the government should extend the lifeline to smaller businesses – especially MSMEs. Smaller companies will need loans to recover. They will need emergency funds to keep their companies running, and interest-free government loans or long-term credit lines will help.

There should also be specific support for sectors that will be severely affected  – airlines, tourism and transportation.

Many companies are doing what they can to keep their employees paid despite a drastic decline in revenue.

But they cannot do this for long. 

As several business organizations have said, “the government can and should adopt a fiscal stimulus program that will raise our deficit-to-GDP ratio to close to five percent, which is a usual red flag for credit watchers, though they will probably relax as an unprecedented number of countries buttress their economies.”

Additional funds to support the Department of Labor and Employment and other programs to support workers affected by the quarantine, whether directly or through companies, are needed.

Those on hand-to-mouth existence are also in dire need of help. Our local government units need to make sure that people in slum areas are able to eat during the quarantine period and nobody is left behind. 

Who was it who said that there are only nine empty meals before a riot breaks out? Our local chief executives need to keep this in mind. 

Big problems need big solutions. A massive stimulus from the government will save lives and protect our society.  

In the aftermath, we also need to work on that long-term economic program to achieve inclusive growth. It’s one way we can prepare for the next pandemic.

For now, the economy needs an antidote and the sooner it gets it, the better it can cope. 

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