Catch a falling economy

With the business of resuscitating the economy now more urgent after the second quarter report showed an unexpected 16.5 percent contraction in gross domestic product (GDP) compared to the same period last year, the government’s catch-up plan should go into full rev.

Initially, the economic team was looking at a V-shaped recovery, where the slowdown during the second quarter would be less severe, to be followed by a bounce-back during the remaining two quarters of the year.

All these projections had gone poof, with new data pointing to a contraction of 5.5 percent for the whole year, which likely means that there will be negative growth in the next two quarters.

Even 5.5 percent, though, could be on the optimistic side given the continued inability of the government-formed COVID-19 response task force to contain the spread. Today, Metro Manila enters its sixth month under quarantine, and with the pandemic still not under control, and the lockdown would likely drag on for another month.

The Philippines is now seen by economic watchers as going in for one of the longest recovery climbs compared to its peers in the region, and this will substantially derail an economic performance that had been the envy of many before the pandemic.

Stimulus package

To bring the Philippine economy back on track at the quickest time, three things need to be done. First, Congress must pass within the month the second installment of the Bayanihan to Heal as One Act (Bayanihan 2) that would allow the release of at least P140 billion.

This stimulus package falls short of what is really needed, but there is always a chance of going for additional funds if the intended results under Bayanihan 2 are delivered, and there is a need for a third fiscal stimulus package.

Unlike Bayanihan 1, which concentrated on providing immediate relief for millions of Filipinos that were affected by work stoppages, Bayanihan 2 will focus on resuscitating businesses that had been forced to discontinue operations during the strict quarantine periods.

Micro, small and medium-sized businesses need as many interventions possible to help them cope with not only lost income, but also an expected reduced growth pace in the next months as households continue to adopt belt-tightening measures in the face of uncertainties.

Bring down infection rates

The second challenge in revving up the economy would be controlling the virus spread, and this should go to more than bringing down the infection rate to the ideal spread of one person to another over a seven-day period. Even one infection in the community must be swiftly struck down.

Filipinos have emerged in this global pandemic as one of the more conservative who take the virus threat more seriously than other Asians in similar professed democratic systems. This may help to keep health threats more manageable, but it has also dampened consumer demand.

Businesses that have resumed operations outside the travel, tourism, entertainment, and recreation sectors are decrying the marked decrease in the Filipino’s appetite to spend, perhaps weighed by prudence that unless an effective vaccine in found, the virus may be around for a long time.

We need standard operating procedures down to the barangay level, much like what South Korea, China, Vietnam, or New Zealand have in place the moment the presence of an infected person is determined.

We must be more adept at doing pocket lockdowns, i.e., house, street, building, so that we can avoid extending this to a wider area. This also allows other people who are not infected to continue working.

Making the money work

Third, make the second stimulus package really work. A sizeable amount of P50 billion is allocated for government financing institutions that will be lent to micro, small, and medium-sized businesses through accredited banks and microfinance institutions.

We’d like to believe our economic team when it says that the P50 billion for MSMEs will generate as much as P600 billion in economic activity. Let’s hope that the money will find its way to deserving business sectors, and not crony companies that don’t deserve to be rescued.

Again, the amount is not enough given the extent of paralysis many businesses face while striving to keep their operations going. Consumer demand will not return to pre-virus levels for a longer time, and scaling down and retrenchments are another new normal that companies have to face.

Demand for appliances, for example, will not go back to the levels before the lockdowns as people prioritize spending on food, utilities, and loan repayment. People are saving money not to buy things, but to be prepared for periods of forced unproductivity.

Strategic importance

Now is the time to give agriculture a shot. It will not only ensure food security for the country, but also sponge up some of the unemployment and encourage the formation of new agri-businesses that can adapt to the pandemic’s new normal.

Bayanihan 2 allocates at least P17 billion for the agricultural sector, but this would be mostly to compensate for the income displacement farmers and fisherfolks have suffered because of the pandemic. The government needs to allocate much more money to help the sector to improve productivity and earnings.

Agriculture has been neglected for too long, and the pandemic is forcing us to see its strategic importance in helping Filipinos survive during the longer recovery process.

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