Too early to say worst is over, says ex-BSP exec

FORMER economic managers warned it might be too early to claim the “worst is over” for the Philippine economy, saying that quarantine restrictions should be further loosened to ensure a stronger and more inclusive recovery.

“It would be unrealistic to assume that we have already flattened the pandemic, and economic activities are on their way to recovery. A resurgence can reverse any initial gains,” Diwa C. Guinigundo, former Bangko Sentral ng Pilipinas (BSP) deputy governor, said in a forum hosted by think tank Stratbase ADR Institute on Monday.

Mr. Guinigundo noted a new wave of coronavirus infections is hitting the United States, as well as some countries in Europe and Asia that have reported early success in containment.

The Health department on Monday reported 1,799 new cases of coronavirus infections, bringing the total number to 420,614.

BSP Governor Benjamin E. Diokno and Socioeconomic Planning Secretary Karl Kendrick T. Chua recently said the “worst is over” for the economy after seeing signs of recovery.

Among the economic data cited are the balance of payment (BoP) surplus widening to $2.104 billion in September, and a 9.3% rise in cash remittances to $2.601 billion in the same month. Foreign direct investments jumped 35% to $797 million in July.

However, the economy remained in a recession, as gross domestic product (GDP) shrank by 11.5% in the third quarter.

“It is too early to claim victory over the deep recession. It would be too ambitious to expect them to resume the usual business activities. This is the essence of economic scars that take time to heal. Savings must have been drawn down, investments have ground to a halt and business activities will be difficult to be put on stream immediately, [since] output and jobs have been lost, while productivity will need time to gain momentum,” Mr. Guinigundo said.

In the same forum, former Socioeconomic Planning Secretary Ernesto M. Pernia said he expects fourth-quarter GDP to shrink by five percent as infections continued to rise and fiscal response remained low. He estimates GDP to contract by 8.5% for the full year.

The Development Budget Coordination Committee is set to revise its projections for the year. It currently expects GDP to shrink by up to 6.6% by yearend.

Mr. Pernia said fiscal stimulus should be further ramped up to help the economy bounce back faster, citing data from the Asian Development Bank that the country’s $21.65 billion spending on pandemic response is the lowest among its Southeast Asian peers: Indonesia, Malaysia, Singapore, Thailand and Vietnam.

“From the beginning, and even now, we can still spend enough to really get things going,” Mr. Pernia said.

Mr. Guinigundo said fiscal policy “should not be timid in this particular issue.”

He said the improvements in key sectors could be sustained by restoring business and consumer confidence, since the Philippine economy is largely driven by consumption. The government should lead the way through effective crisis management and response, he added.

“Unless this is effectively and credibly done, the economic scars of loss output, loss of jobs, businesses, weak consumer and business confidence, will continue to take their toll on future economic performance,” Mr. Guinigundo said.

At the House of Representatives, another bill proposing a third stimulus package has been filed.

House Bill No. 8059, or the Bayanihan to Rebuild as One Act (Bayanihan III), proposes to allocate P247 billion in emergency response and economic recovery programs.

House Ways and Means Chair and Albay Rep. Jose Maria Clemente S. Salceda, the bill’s co-author, said a third stimulus package is necessary to ensure that the crisis does not “eat up too much of our economic structure.”

“It is very hard to recover when so many businesses have already closed for good,” he said in a statement, adding the Bayanihan III is “the necessary booster shot so we can truly begin recuperating in 2021.”

“The Executive can make their concerns known, and we will take them into consideration. They can even give us a fiscal limit to work on. But what we cannot accept is the idea that we have spent enough in 2020. That may have been barely true if the recent calamities did not strike. But the sheer fact is that more people have gone into poverty this year than we expected,” Mr. Salceda said.

“Finance Secretary Carlos Dominguez does not have to worry about fiscal discipline on the part of the House. If there is only so much in Bayanihan III that the government can afford, we will cooperate. But it cannot be zero.”

House Stimulus Committee Chair and Marikina Rep. Stella Luz A. Quimbo earlier filed her own version of the Bayanihan III bill, which would require an allocation of P427 billion. — Beatrice M. Laforga and Kyle Aristophere T. Atienza