By Lee C. Chipongian
With various countries on different lockdown measures, the coronavirus pandemic has changed major and minor economies and the Philippines must adopt and be “technologically ready” and prepared to create emergency jobs for a “New Economy,” said the central bank chief.
“As individuals, and as a people, we should prepare for a ‘New Economy’ — not a ‘New Normal,’ which is an oxymoron,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Monday. “The ‘New Economy’ should be better, safer, and more technologically ready.”
Diokno, an economist, former UP professor, and ex-budget secretary, said that as the government prepares for what is next in the fight against COVID-19, what matters now is the preservation of lives and to ensure people have jobs to feed and sustain households.
“The political leadership and the economic managers should focus on saving lives, saving livelihoods and saving jobs,” he said, adding that the “lofty goals of getting an ‘A’ rating by 2022 and achieving upper middle income status this year can wait.”
Diokno said that amid the pandemic, whether under general community quarantine or extended enhanced community quarantine, the government would have to provide emergency employment as fiscal stimulus.
“As the government moves into the next phase of the road to the ‘New Economy’ it should focus on a quick disbursing, employment creating program. It needs a supplemental budget, the size of which can be decided upon by the President with the recommendation of his economic managers,” the BSP chief said.
Diokno said “new” spending could be generated by increasing the budget deficit by a percentage or two, equivalent to ₱200 billion to ₱400 billion and this could be used for emergency employment and create two million jobs.
“The Executive Department needs new spending authority. It needs a supplemental budget,” he stressed. “The emergency employment is quick- disbursing and will have high multiplier effect. It is pro-poor and egalitarian. It gives the ordinary worker a greater sense of self respect since he works for the food on his table. By helping himself, the worker helps his fellowmen and society.”
Diokno said the two million jobs will be given to 42,045 barangays and will be distributed depending on the barangay population or how many are unemployed.
“The nature of the job will be determined by the barangay chief. The workers may do a green project (cleaning of rivers, tree-planting, etc.), public works project (road maintenance, fortifying sea walls, social housing) or health project (contact tracing, maintenance work in COVID-19 facilities, etc.). The workers will be paid 10 percent lower than the minimum wage rate in the region, will work for eight hours, five days a week, for seven months (June to December 2020),” said Diokno.
In the meantime, Diokno said that with the pandemic, the government’s goal of acquiring its first “A” credit rating is not a top priority but it could be achieved by 2022. For now, he said the Philippines “Road to A” will be taking a “back seat.”
“Our concern right now is to help our people rather than pursuing our ‘Road to A’ although we are still confident that we may reach or achieve an ‘A’ rating by 2022,” he said.
The “Road to A” is a government program announced in 2019 but it’s been in the works since the country bagged its first investment grade rating in 2013. With an “A” credit rating, the government can enjoy lower borrowing costs.
“Achieving an ‘A’ rating by 2022 may or may not happen but as I said we are focused – the BSP and the National Government – will remain focused in pursuing appropriate policies and the necessary structural reforms to put the economy back on its high growth trajectory,” said Diokno. “This pandemic hit the Philippines at a time when we are on the roll, the economy and macro-fundamentals are sound but unfortunately, we, like the rest of the world are suffering.”
Currently, the Philippines enjoys an investment grade “BBB” credit rating or its equivalent from the three “Big Three” credit watchers. A single “A” is just one notch away.
Fitch Ratings has a “BBB/Stable” ratings for the Philippines, while Moody’s Investor Service has a “Baa2/Stable” and a “BBB+/Stable” from S&P Global Ratings.
Because of the pandemic, credit rating agencies have issued downgrades in outlook worldwide.