Tag: Signs And Wonders

Six years ago, Liliana Rojas-Suarez, senior fellow and director of the Latin American Initiative, researched and published for the Center for Global Development (CGD) an interesting study of emerging markets’ resilience to external shocks. She compared their performance in 2007, before the Global Financial Crisis (GFC), and seven years later in 2014 covering 21 countries.

It’s most interesting juxtaposition between the varied accounts and perspectives on the pandemic and the Authorities’ optimistic view of the Philippine economy this year and the next. We saw this in the last few days splashed all over the broadsheets, with both citing factual basis but pointing perhaps to some qualified conclusion.

By this time, we should already be familiar with how we fouled up our handling of the viral pandemic. It all started with years of neglect of the public health system. We also failed to act promptly on the brewing Wuhan threat. After crossing the border, the virus simply brushed off our less than desirable level and quality of testing, tracing, quarantining, and treating. Finally, our lack of vaccination policy has further eroded consumer and business confidence because somebody dropped the ball. What follows is an abject lesson in theatrical obfuscation.

Last Monday, the press covered the Bangko Sentral ng Pilipinas’ report on business expectations for the last quarter of 2020. It’s a relief seeing the headline numbers showing that firms in the survey “have revived plans to pursue expansion programs and hire more workers next year in anticipation of a strong economic rebound from the pandemic-induced recession.”

If there is a “fiscal drag,” we also have a “monetary drag.”

If there is anything useful about COVID-19, perhaps it is its devastating impact on the nation especially on the poor. Not for anything else, but many see it, and soon enough, many will feel and learn from it.

Seven years ago, John Cassidy wrote an interesting article in The New Yorker titled, “Before the Fall: Disaster Myopia at the Fed.” He shared his appreciation of deliberations on monetary policy by the Federal Open Market Committee. Because of Cassidy’s glasnost, or policy of greater transparency; and thanks to wider information dissemination pioneered by Alan Greenspan (continued by Ben Bernanke), monetary policy making-dynamics is for the world to read, and even judge, years after the Global Financial Crisis (GFC) of 2007-2008.

On July 16, we wrote about what many believed to be the three initial signs of business revival after several months of the pandemic. They were the slower decline in external trade, the softer drop in manufacturing output and expansion in capacity utilization, all in May. We called these green shoots, but not quite at the time.

The broadsheets described the third quarter real GDP growth at -11.5% as indicative of an “economy on the mend.” The recession was deep, but not as deep as the second quarter’s deep dive at 16.9%.

We all aspire for a strong economic recovery. But it is prudent to ensure we tie the loose ends in our fight against the virus. There are many challenges to growth after the lockdowns are eased; a near-normal path will not be an easy walk in the park when labor gets back to work. As Dr. Edsel Salvana warned, the virus doesn’t play by the rules. It continues to rewrite the rulebook.

In two parts, we discussed in our column in another broadsheet the Philippines’ deficit in public governance in the context of managing the pandemic crisis and navigating through a sensitive trade-off between health and economic recovery (“Of substance and spirit,” Manila Bulletin, Oct. 15 and Oct. 22).

Thomas Piketty’s Capital in the Twenty-First Century was named the 2014 Financial Times Business Book of the Year. The book explained wealth and income inequality in Europe and the US over 300 years. Piketty argued that when profit exceeds economic growth over a long haul, there is wealth accumulation and concentration. Social and economic instability ensues. Capitalism sows the seeds of inequality. To address this, progressive wealth taxes must be imposed to reduce inequality and mitigate wealth concentration. Piketty then revised his thesis to say that the relationship between profit and economic growth constitutes only one of various instruments to explain income inequality and wealth accumulation.

National Statistician Dennis Mapa confirmed that the pandemic has severely affected the very poor — the bottom 30% of income households. With cash transfers that not every impoverished Filipino has received, there are but feeble safeguards against extended hunger and poverty.

We are proud to see the Bangko Sentral ng Pilipinas (BSP) showing its ability to defy pandemic-induced impediments to the actual conduct of consumer and business expectations surveys “to measure investors’ risk attitude and quantify its impact to stock market in a more direct and timely manner.”

On Sept. 21, during Standard Chartered Bank’s ASEAN Webinar, Bangko Sentral ng Pilipinas (BSP) Governor Ben Diokno was quoted saying: “Overall, the total amount of additional liquidity injected into the system from these collective (monetary) measures is estimated at P1.4 trillion, equivalent to 7.3% of GDP.” In its magnitude, this is almost 30% of the proposed national budget for 2021.

Bangko Sentral Governor Ben Diokno announced that starting Sept. 18, the BSP will offer P20 billion ($411 million) worth of 28-day bills to the market.

In his recent commentary in an IMF Blog, Nobel laureate Joseph Stiglitz of Columbia University argued that COVID-19’s impact differs from country to country.

A group called The Mayor Rodrigo Roa Duterte National Executive Coordinating Committee (MMRI-NECC) has called for the establishment of “a revolutionary government.”

Rapid tests for the coronavirus cannot accurately distinguish between the influenza and the COVID-19 virus. Reliability is said to be at only 34-80%. This is not much better than flipping a coin. Rapid tests detect antibodies — not necessarily against COVID-19 per se  — produced several days to a couple of weeks after a viral infection. Rapid tests are prone to produce “false positive” results.

The latest twist in our pandemic drama is the President’s admission that MECQ over Metro Manila, Bulacan, Rizal, Cavite, and Laguna would be difficult to extend, “due to lack of funds to help those whose movements are limited by the lockdown.”

Last Monday, after patiently enduring five months of variously named-lockdowns, the Filipino people eagerly lent their ears to the President, desperate to hear some good news and a clear plan of action. For the daily update of COVID-19 incidence in the Philippines continues to pull down the public’s sense of safety and security.

Market assessments of the Philippine economy’s prospects for this year and the next, are commonly grim and underlined by pessimism.

Last week, National Economic and Development Authority (NEDA) Secretary Karl Chua cited three signs that could point to a pickup in economic activity. These indicators come at the heels of relaxed quarantine measures in several areas:

More than a decade ago, after the Global Financial Crisis and the dislocation of some European and Asian debt markets, monetary policy and banking regulations helped mitigate impaired money, securities, and foreign exchange markets.

In a lecture before the Peterson Institute for International Economics on Jan. 17, IMF Managing Director Kristalina Georgieva said that if she had to identify a theme at the outset of the new decade, “it would be increasing uncertainty.”

Using four standards of competitiveness as basis: economic performance, government efficiency, business efficiency and infrastructure; and relying on 2019 hard data and perceptions from a 2020 executive opinion survey, the 2020 International Institute of Management1 (IMD) World Competitiveness ranked the Philippines 45^th out of 63 economies.

While COVID-19’s full impact on economic thinking and policy cannot be gleaned from a quick survey of current economic literature, there is still useful information.

The Economist described the current US riots, violence, and looting as a “fury of polarization.” It is inauspicious that these lawless outbreaks are happening at the same time as the deadly COVID-19 pandemic.

As we enter into the third month of our own country’s battle with COVID-19, despair is fighting for a foothold. Isolation of individuals and communities breeds depression.

Before COVID-19, the IMF, the World Bank, and the ADB were one in forecasting that this year, the Philippines’ real GDP growth would be one of the highest among the ASEAN 6. This prediction did not come to pass. The viral pandemic notwithstanding, the IMF must be in a deep quandary over why we did not perform as well as everyone expected in the first quarter of 2020.

In response to the COVID19 pandemic, Vietnam locked down for three weeks. The Vietnamese started much earlier than we did and quickly supported its lockdown with the fortification of its health sector. Reuters recently reported: “Vietnam was successful because it made early, decisive moves to restrict travel into the country, put tens of thousands of people into quarantine and quickly scaled up the use of tests and a system to track down people who might have been exposed to the virus.”

Controversial French writer Michel Houellebecq recently declared that the world will be just the same after the coronavirus -- only worse. Houellebecq described COVID-19 as a “banal virus” with “no redeeming qualities.” He warned that self-distancing and home-working accelerate isolation -- the “obsolescence of human relationships.”

After almost two months of economic lockdown by May 15, we pray that circumstances would be more conducive to slowly opening up the economy. We should now be preparing to pick up the pieces and to bounce back. Are we ready?

The journey to the new normal has many alternative routes. One of them is the attempt to achieve herd immunity against the pandemic. Seen as an alternative to a prolonged lockdown, the strategy involves exposing the majority of a community’s population to the pathogen. When the infected have recovered, herd immunity is said to be attained. Theoretically, this approach involves less economic dislocation. But it may entail greater human suffering as the disease is given more space. Suggested by some Princeton researchers, the herd immunity strategy is expected to work in India given its relatively young population. They will be allowed to return to work and to assume a “normal” life while continuing with social distancing, mandatory wearing of masks, and a ban on large gatherings.

This viral pandemic has its own dynamics. The Luzon-wide Enhanced Community Quarantine (ECQ) has wisely prioritized public health and countless lives over business. But not without costs. Unavoidably, there is some short-run trade-off between preventing mortality and economic growth.

Except perhaps for Bill Gates, even top economists and thinkers never expected COVID-19 to be this devastating.

The Corona outbreak was declared a pandemic by the World Health Organization (WHO), describing it not just as a public health crisis, but one “that will touch every sector.”

The coronavirus continues to cause fear in civil society and financial markets. In my last column, assurance was given that the Philippine growth story is not mythical. There is substance to the signs, even as they might be wonders to some.

This is my inaugural column in BusinessWorld. My profuse thanks to Willy Reyes, BW editor-in-chief, for the opportunity to contribute to discussions in civil society on how best to shape public policy and institutions in the context of attaining high, self-sustaining, and inclusive economic growth.