Make or break: The last quarter…

Published February 4, 2021, 12:21 AM

by Diwa C. Guinigundo


Diwa C. Guinigundo

Our economic managers fully realize, and we agree, that prior to the pandemic, they inherited one of the most promising, most dynamic emerging markets. We reaped the benefits from a 30-year pursuit of policy and structural reforms that unleashed the potentials of a more competitive and market-driven economy. Aiming for a more inclusive and self-sustaining growth, the government also tried to leverage on the digital platform and harness the significant increase in total factor productivity and economic efficiency. The Philippines became more resilient than many of its peers. We gained long-term strength from our young and talented population that helped us avoid the perils of an aging population while addressing the challenge of providing quality education and rich job opportunities. This is the only way to reap the demographic dividends.

The government spent heavily relative to the annual budget to close the large infrastructure gap and cover all grounds on our way to becoming a high middle-income country. The road to an A investment grade looked clear.

But COVID-19 and all its known variants unmasked one important impediment to mitigating the health crisis, minimizing mobility restriction, and getting business activities going again.

This impediment is poor governance.

The Duterte administration is now into the last quarter of its six-year term and it is our prayer that it would not waste it. Some behavioral economists argue that “last chances” make us panic for fear of regret. We believe that we have enough adults in the Cabinet, especially among our economic managers, that for one last time, can put their heads together and begin to act as one. In the first place, we thought the mantra in this time of the pandemic is precisely healing as one.

We could have done better in public health management if our health authorities immediately restricted international travels from infected countries. Support could have been quickly organized among our telecom, financial technology, and our very own Department of Communications and Information Technology experts in crafting and implementing effective testing, tracing, and quarantining system. It is not too late to intensify the efforts in this direction because we continue to fight the virus and its allied mutants.

We do not need to be reminded that in various international studies and surveys, the Philippines always came out close to the cellar when it comes to pandemic mitigation and lately, in sourcing and administering the vaccines. Poor governance is when just one functionary could stall whole-of-government, whole-of-society efforts to accelerate the requisition of good vaccines. Poor governance is when the spokesperson of the government had enough gall to rebuke us ordinary mortals that we could not be choosy with the vaccines. Poor governance is when we are left with no choice but to secure vaccines from sources we would not ordinarily buy from. Poor governance is when people become sceptical about public policy they would rather break than follow.

As The Guardian’s Zoe Williams wrote: “In order to follow strict rules, people need to believe they will make a difference: a drop in cases is not enough. If no progress is made during the lull, it feels like an outcome postponed rather than averted.”

It is about time we stopped blaming the lockdown for the deepest recession we suffered in decades. The lockdown is simply the result of poor governance of our public health system. Restricting mobility is easier to implement than thinking through various technical issues surrounding a good surveillance of which locality has recorded the biggest number of infections on which to apply localized solutions. On this basis, the call to relax age restriction and open businesses and mass transport is misplaced. We can only put our guard down when we see new cases trickling down to tens or a few hundreds, or the vaccines are more widely available to more than half of the population.

This much wrote Moody’s Analytics, arguing that “a recovery hinges on the government’s plan to vaccinate as many as 70 million Filipinos this year, or two-thirds of the population, allowing social distancing to be lied and tourist arrivals to resume.”

There is good governance when the President continues to focus on good politics and economics.

There is very little point picking up fights here and there, and everywhere. Media is not the enemy of the state, it is a partner for nation building. Thus, the efforts in Congress could have been better spent on more pressing concerns like the fiscal reform bills. The anti-terror act hogged the headlines for weeks and now the Supreme Court is busy deciding on how to dispose of it after the oral arguments by both the petitioners and the solicitor general. Red-tagging was nothing but hare-brained, a total fiasco for the military. Public resources are too thin to be wasted tilting at windmills.

Government should cease seeing shapes in the clouds. Not all good signs point to a quick economic revival. We should examine what drives a good Balance of Payments (BOP) position and a strong Philippine peso. Weak imports and heavy foreign borrowings could prettify our BOP and increase our Gross International Reserves (GIR) but they portend a weak, rather than a strong, economy. Due to a weak demand for imports, demand for dollars is also shaky, while proceeds from external borrowings accumulate, resulting in either a strong or a stable domestic currency.

Seeing shapes in the clouds is when we continue to see room for further monetary easing when the very forecasters who encouraged the BSP to further expand liquidity and reduce policy rates now warn of elevated inflation in 2021. As Moody’s Analytics opined, BSP tools are running low as inflation trends up. Policy rates are now negative in real terms.

The President must have also seen some shapes in the clouds. He immediately issued Executive Order 1214 imposing a 60-day price freeze in Metro Manila public markets on pork and chicken. A stop-gap measure to check unscrupulous traders and profiteers, this is not a sustainable policy over the long run because the root cause is actually weak supply due to the effects of the African Swine Fever (ASF) and the logistical nightmare that is the coronavirus. Importation at lower tariffs is one proposed solution that is market-based, inspired by the favorable impact of the rice tariffication law.

To achieve a good combination of economic recovery and stable prices, we should see a steady monetary policy, a more aggressive public spending, and more effective public health management.

For example, what encouraged us recently was that the factory output based on the IHS Markit’s monitoring of Purchasing Managers’ Index (PMI) indicates a strong recovery in January, 2021. The index rose from 49.2 to 52.5, above the neutral mark that presages expansion in business activities. That put us above the ASEAN average of 51.4. Whether this would continue or not ultimately depends on business confidence in the health prospects and sustained gains in domestic demand.

Once upon a time, Filipinos were accused as “pasaway.” No, they are not. With a few moneyed and popular exceptions, they continue to abide by the rules of quarantine. However, when they wear face masks and face shields for too long, left without jobs and income, lockdown fatigue could very well set in.

We would like to think that poor governance is not the “gorilla in the room”—that which is of supreme importance and urgency to resolve but nobody seems to know. Rather, it is the “elephant in the room” that everybody feels convenient to ignore. Lest we forget, those big gentle elephants can also run amok.