Vaccines to also rev up Philippines economic recovery

“For 2021, the economy is expected to bounce back, growing by 6.5 to 7.5%,” Diokno declared.

He is a doctor but not of a medical field. But Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno has a very good prognosis on the state of health of our country’s economy slowly recovering from the 2019 coronavirus disease (COVID-19) pandemic. Declared by the World Health Organization (WHO) as an emergency public health crisis, the COVID-19 pandemic has crippled many economies around the world and in much more degree upon smaller countries like the Philippines.

Prior to joining the public service, professor Diokno first taught economics in several schools that included his alma mater University of the Philippines where he finished his two degrees in public administration and in economics. Diokno earned his doctor of philosophy (PhD) with economics degree at the Syracuse University in New York. Also, he holds a Master of Arts in Political Economics from the Johns Hopkins University in Baltimore, Maryland. Incidentally, the Johns Hopkins University of Medicine is internationally recognized institution monitoring the COVID-19 cases all over the United States and other pandemic-affected countries independently from the WHO.

As among the central banks in the world, Diokno disclosed the immediate interventions of the BSP in responding to the crisis to nurture the strong macro-economic fundamentals in the Philippines. For one, he revealed, a total of P2 trillion has been “injected into the financial system” through BSP’s policy and liquidity-easing measures. This is equivalent, he cited, to about 10% of the country’s 2019 nominal gross domestic product (GDP) level.

In a speech before the Tuesday Club virtual breakfast gathering, Diokno heaved a sigh of relief that the pandemic-induced crisis came at a time while the Philippine economy “was in a position of strength” when the COVID-19 contagion broke out during the first quarter of last year. In the traditional address by the BSP Governor on the first Tuesday of the new year, Diokno credited the “fortitude and resilience” of the Filipino nation even during the strictest period of lockdown. Thus, Diokno admitted, it helped a lot the BSP to cushion the pandemic’s impact to the entire economy.

President Rodrigo Duterte first imposed the nationwide lockdown on March 16 last year in a bid to stop the local transmissions of the COVID-19 contagion in our country. Since then, the community quarantines have been recalibrated, depending on the incidence of COVID cases in particular areas in the country.

“2020 was an extraordinary because of the COVID-19 pandemic which by the way is more than a health crisis as the country also felt its debilitating impact on lives, livelihoods and inequality,” Diokno noted with concern. He conceded though: “The COVID-19 crisis has also taught us that there are limits to what monetary policy can do.”

The BSP Governor gave us all Filipinos reasons to believe, however, on improving economic situation for this year. This is on the projected procurement soon in the Philippines of the anti-COVID vaccines. Diokno reaffirmed the very favorable forecasts of economic recovery in conversations with us the next day when he guested in our virtual Kapihan sa Manila Bay. This he did during our brief Zoom Webinar on the first working week after the long Christmas and New Year celebrations in our country.

Aside from the other structural reforms already put in place, the BSP Governor identified as the other possible contributors to the projected growth recovery to be driven by higher government spending and the passage into law of structural reform programs such as the Corporate Recovery and tax Incentives bill and the Financial Institutions Strategic Transfer (FIST) bill. These were the pet bills certified as urgent administration bills of President Duterte that the 18th Congress approved into law one after the other late last year.

“The shock from the COVID-19 pandemic is unprecedented. After exhibiting 84 consecutive quarters of growth, the real GDP declined by 0.7% year-on-year for the first quarter of 2020,” Diokno rued. By the second quarter of 2020, real GDP contracted by 16.9% and in the succeeding third quarter the real GDP also declined “but at a slower rate” of 11.5%. On year-to-date basis, Diokno calculated as much as minus 10% was the average contraction of the GDP growth. “The slower pace of GDP contraction is expected to continue in the 4th quarter of 2020,” Diokno conceded.

Actually, it was Socio-Economic Planning “acting” Secretary Karl Kendrick Chua who earlier revealed the same economic growth prospects as measured in terms of the country’s annualized GDP. But the GDP growth targets are set by the Development Budget Coordinating Council (DBCC) where both Diokno and Chua are part of.

Moreover, as the chairman of the Monetary Board – the country’s chief monetary policymaking body – the BSP Governor is privy with all of these economic data. While the BSP works autonomously and independent of any branches of the government, the Governor is recognized as a key adviser to the Cabinet economic team composing the DBCC.

“For 2021, the economy is expected to bounce back, growing by 6.5 to 7.5%,” Diokno declared.

These growth projections, Diokno revealed, are based on their original assumptions that Filipinos will be vaccinated in the first half of 2022. “So if that happens, the early introduction to the country, that will be actually additional positive for the country,” he stressed.

“So any early introduction of the vaccine in the Philippines will even improve the 6.5 (GDP growth rate) to 7.5%,” Diokno boldly predicted. He quoted “vaccine czar” Carlito Galvez Jr. who earlier announced the anti-COVID vaccines will start coming in the second quarter of this year.

Diokno urged Filipinos to keep complying with health protocols to avoid COVID-19 infection but must “not to cower in fear” to the pandemic. With consumption-driven GDP growth, BSP Governor relies to the “confidence” of the Filipinos as the shot in the arms – like a vaccine – most needed at these times by the Philippine economy.