What can the President say?

What can the President say on his fifth and penultimate address to the nation next week? The pandemic has dragged the Philippine economy into recession territory after more than two decades of growth, and the worst may yet come.

The country’s fight against the novel coronavirus, unfortunately, continues. With the economy partially reopening, so have the numbers of infected people and deaths rising. Keeping people’s health safe has never been such a difficult task.

Keeping people employed, however, has become even more challenging. Millions have lost jobs as small businesses flounder or close shop, and big businesses scale down expansion plans. Financial reports by businesses for the first half of the year are awash in red as earnings plunged during the lockdowns.

So much uncertainty hovers as the nation flirts with the possibility of the National Capital Region (NCR) put back into another enhanced community quarantine (ECQ), which would mean all the businesses that had been allowed to operate will be shuttered once again.

Should this happen, hundreds of thousands of micro and small businesses will be forced to permanently discontinue their operations, laying off millions more of workers. This is something that the economy will have difficulty surmounting even next year.

The virus has demonstrated its toughness even in countries like China, Australia, and South Korea, which had earlier managed to contain infections with their superior health protection protocols. Containment measures have been again put in place in those countries.

Confidence

The economic team has been urging the President to speed up the reopening of the economy by bringing NCR and certain areas of the Calabarzon, which together accounts for two-thirds of the country’s gross domestic product (GDP), under a modified general community quarantine (MGCQ).

NCR and parts of Calabarzon continue to be under GCQ, a step-up from ECQ, since June 1, but the rising cases in infection since the easing has persuaded the President in maintaining the status quo. Cebu, which is also a center of economic activity for the country, reverted to ECQ this month.

The prolonged GCQ in the NCR and parts of Luzon, according to the economic managers, will certainly not help in reducing the estimated economic contraction this year of between two to 3.5 percent. Still, they contend that the Philippines will be in a better position next year to post growth should the economy ease its quarantine restrictions soon.

This confidence springs from a recent prognosis by the Asian Development Bank that the Philippine economy will still make a U-shaped economic recovery within the next 18 months, with GDP rebounding to a 6.5 percent growth next year. This is a far better expectation than those of other competing countries in the region like Thailand, Cambodia, and Singapore.

Focus on SMEs

Meanwhile, the economic team is focusing on the passage of a number of economic and stimulus bills when Congress reopens on July 27, coinciding with the President’s State of the Nation Address (SONA).

Focus will be on small and medium enterprises (SMEs) that make up 99 percent of registered businesses in the country, and many of which had been severely affected by the ECQ that started in mid March and ended on May 31 for a big part of the country.

Aside from extending lower loan rates and guarantees to distressed SMEs, the economic team is eyeing measures to help banks dispose of bad debts and assets, thus freeing up financial resources that, in turn, could be lent to SMEs in need.

Some P50 billion is proposed to be funneled to the Land Bank of the Philippines and the Development Bank of the Philippines, and another P20 billion from the Philippine Guarantee Corp. for private banks to access. How the new initiative proposed by the economic team will help SMEs bears watching.

The total amount, of course, pales in comparison with the first stimulus package that the President had signed into law last April that called for the reallocation of the approved 2020 fiscal budget to a ramped up social amelioration program (SAP).

By the time the law lapsed on June 25, the Department of Budget and Management reported that over P355 billion had been disbursed for the government’s pandemic response, of which P200 billion went to SAPs, P52 billion for displaced workers, and P48 billion for strengthening the public health care system.

Conservative stance

Finally, the economic team is looking at additional subsidies amounting to about P100 billion to complement the first stimulus package to further address lost wages and improve public health response against the virus.

The meager amount – compared to the P1.3 trillion allocation that the House of Representatives earlier proposed – recognizes the fact the pandemic is far from over, and that the best fiscal response would be frugality in anticipation of further economic disruptions.

Such a conservative stance by the economic team also recognizes that fiscal revenue collections throughout the year will continue to be tight even if a further easing in the current quarantine levels will be declared.

The economic team has also ruled out further borrowings in anticipation that the pandemic drags on in the next years.

All the above definitely make for a report that the President will not want to explain during his yearly report to the nation. Even if he starts to enumerate the number of households and families that have been given a sprinkling of aid with the government’s first stimulus package, this cannot dispel from the reality that more people have been moved to poverty and millions of jobs have been lost while the pandemic continues to rage on.

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