Of substance and spirit
The formula for economic recovery in the Philippines, and for that matter, anywhere in the world, is almost always anchored on the ability of the health authorities to contain COVID-19 virus and its emerging variants. This is possible only if public money is available. Which is why we should always look at the national budget and check whether a good share is spent on pandemic mitigation and social support to both individuals who lost their jobs and lives, and small businesses which closed down in ignominy.
For international assistance like what the ADB extends to its member countries, the thrust is people’s welfare first and economic recovery second.
In one of the articles in ADB’s Navigating COVID-19 in Asia and the Pacific published in September, 2020, for instance, Jesus Felipe and Al-Habbyel Yusoph presented the share of each economic measure among ADB members in its package against COVID-19. Between April and June, 2020, the biggest measure was the direct support to income of affected individuals. Income support accounted for 40.73 percent in April but rose to 48.54 percent in June 2020. Ensuring functioning money markets was second with about 20 percent in both months. The other components included lending to non-financial sector, credit creation, international assistance and equity claims on the private sector.
ADB’s package for its developing country members rose from $2 trillion in April to $3.1 trillion in June last year, not a small amount by any standard.
Yet more than a year and a half into the pandemic, the world is hardly out of the medical woods. While massive vaccination is a work in progress, the pandemic continues to ravage big emerging markets particularly India and Brazil. New infections are now bedeviling Indonesia, Malaysia, Myanmar and yes, Vietnam.
In Japan, Olympic organizers reported the first cases of the new variant infection. In China, both pupils and parents are required to be vaccinated before they are allowed to return to face-to-face schooling in autumn.
This is not limited to Asia. Britain’s daily infection has reached nearly 40,000 a day with its health minister testing positive for COVID-19.
It was correct, therefore, for the Department of Health to advise hospitals and other medical institutions to prepare for possible upsurge in COVID-19 cases. We need to expand the number of beds, oxygen supply, and other medical logistics. Failing this would mean another round of infections and lockdowns, setting the stage for another economic retreat.
For Congress, Bayanihan III could fund additional requirements. But we sense that our economic managers are not very keen on the third package because of the country’s fiscal capacity. If funds are still unspent under the first and second stimulus packages, no less than the presidential spokesperson believed that perhaps “there is no need for Bayanihan III.”
Our monetary authorities share this view but for a different reason. Legislating Bayanihan III would not “improve the country’s credit standing,” in reference to Fitch’s credit outlook downgrade of the Philippines from stable to negative. Of course, the real issue is whether Bayanihan III could enhance the country’s ability to contain the pandemic and nurture the green shoots to economic recovery.
But the BSP is correct in its advocacy for a more rapid vaccines rollout, pursuit of structural reforms and more spending on infrastructure. Fitch identified these as “credit sensitivities” that would determine whether we would see rating downgrade from triple B to triple B- in the next 18 months.
Beyond that, there are numerous problem areas in the third package. Because of the prolonged lockdown, more Filipinos are believed to be in continued need for ayuda, totaling P216 billion. But only smaller amounts are allocated to emergency assistance to affected households, wage subsidies, and support to various social sectors. The second biggest chunk is for “pension and gratuity fund,” the pension fund of retired military and uniformed personnel that is unfunded, indexed to the salaries of the incumbents and recently raised. Congress should review this fiscal burden to ensure fair coverage of our military personnel without immiserizing our taxpayers. Otherwise, the national budget will continue to bleed at the cost of more pressing demand like the immense challenge of mitigating the pandemic and bringing the Philippine economy to safer harbor.
Doing away with Bayanihan III should be supplemented by judicious realignment of the budget away from some politics-induced expenditure items, immediate clearance of those “for later release,” within this year, and perhaps defunding activities of doubtful priority in this time of the pandemic.
There is some basis for our singular concern about the need for more rapid vaccines rollout. The recent account of Singapore’s The Straits Times of July 17, 2021 based on Bloomberg Vaccine Tracker and Our World in Data, the Philippines would require 23 months to attain 75 percent coverage of its population. This means until 2023, the road remains unclear for a more definite economic recovery. Our speed in reaching 75 percent coverage is nearly as slow as Laos and twice as long as in Timor Leste, Thailand and Indonesia.
We therefore see only one way to interpret UK-based Pantheon Macroeconomics’ ambivalent observation that we are staying on growth track despite our sticky caseload and test-positivity rate continuing to “hover dangerously in the low double-digit range.”
It’s make or break again for the Philippines.