THE size of a government’s spending package is not a reliable indicator of how effective its response is to the pandemic, an advisor to a research office run by the Asian Development Bank (ADB) said.
Jesus Felipe, an advisor to the ADB’s Economic Research and Regional Cooperation Department who oversees the bank’s COVID-19 (coronavirus disease 2019) Policy Database, said all countries were caught unprepared when the pandemic hit and there is no absolute way to measure the “appropriate” amount that a government should spend, adding that comparisons of spending packages within the region have little validity.
“Numbers are important and numbers guide you… (but) a mistake is to start comparing the packages and think that the package of country X should be bigger just because the neighbors’ are bigger. There is absolutely no rationale for that… There is no such thing as the bigger, the better. You need to study likewise the quality of the measures,” Mr. Felipe said in an interview Friday via Zoom.
“Should the package (of a country) be twice as big as it is? I have no idea. How will you know that it is the appropriate package? The general answer is that this is not the way to evaluate the soundness of a package,” he added.
The database maintained by the ADB shows that the Philippine government’s pandemic response package is the sixth-largest in Southeast Asia and fifth-smallest relative to population.
According to the ADB’s COVID-19 Policy Database, the Philippine package was $20.078 billion as of June 1 from $19.8 billion in mid-May, after additional amounts to support health-related expenses and other measures were included.
The latest total is equivalent to 5.46% of gross domestic product (GDP) and $188.26 per capita, up from 5.39% of GDP and $185 per capita previously.
The Philippine package was the sixth largest of 11 Southeast Asian countries, lagging leader Thailand’s $84.092 billion.
On a per-capita basis, the Philippines lags leader Singapore’s $9,821.42.
According to Mr. Felipe, most countries have implemented “relatively similar” policy measures to respond to the pandemic, including direct support to consumers and businesses and the use of monetary policy tools, varying only in manner of implementation and other package details.
Other large economies such as the US and Europe, he said, have unveiled huge packages, largely because they were among the hardest hit by the pandemic.
He said the Philippines “is doing a very good job” by “reacting positively” as needed, with about half of its package or $10 billion allotted for direct income support for its vulnerable population.
“Also, the central bank is actively supporting the actions of the government and this is very unique; very few countries in the world are doing it the way the Philippines is doing it. This is… going in the right direction,” he said.
Among the measures the government has rolled out so far are a P200-billion cash aid program to workers in the informal sector, a P51-billion wage subsidy program, a P120-billion loan guarantee program, regulatory relief and deferment of tax payments.
Mr. Felipe said governments, in general, should not worry too much about fiscal deficits but instead focus on addressing the health of the private sector in a sinking economy.
“I think (it) is absolutely crucial to ask how you want your private sector to be at the end of the pandemic, because the fragility of the private sector tends to be a very good proxy for a crisis. I would advise policymakers to be much less concerned with the fiscal deficit,” he said.
The Philippine government is projecting a budget deficit this year of between 8.4% and 9% of GDP amid deteriorating state revenue and higher pandemic expenses. — Beatrice M. Laforga