The economy is reopening. Vaccine supplies are on the rise. Covid-19 cases are on the decline. The National Capital Region is reporting vaccination rates that are close to the target of 70 percent. Perhaps, the better Christmas that the IATF and Secretary Carlito Galvez, Jr. promised might yet become a reality. These are all welcome developments and we should acknowledge the combined efforts of government, business, the essential services and the public-at-large. After a spell of discouraging news and an increasingly dire health crisis, the country is starting to be hopeful again that the worst could be behind us. Yes, we have probably “flattened the fear” but we should, for now, continue to remain vigilant.
As we enter the final quarter of 2021, businesses are beginning to see a glimmer of light at the end of the tunnel. The improving situation of vaccinations and declining COVID infections is leading to a rise in mobility. This is essential to reviving economic activity. Hiring, too, is on the rise and this is resulting to an inevitable –but very crucial – increase in consumer confidence.In turn, this should translate to a climb in demand for goods and services that will increase gross domestic production.
Is it all merry and bright? Are we really turning the corner to better days ahead? I would like to think that we are on the road to healing the scars inflicted by thepandemic. Filipinos – and people around the world – are starting to understand and accept that we can live with COVID-19.
By getting inoculated with the COVID vaccine and adhering to health protocols, we can continue to function reasonably well in society.Travel corridors can be opened. Social gatherings can be allowed with clear guidelines. Public events should be able to resume under the supervision of local government units. Economically, more and more segments of commerce and industry are being allowed to re-open their doors. Allowing Filipinos who have received their vaccines to enjoy some degree of leniency in physically re-engaging with commercial establishments should be encouraged. Reporting to work can be resumed with clear workplace protocols.
While there is much that can get us excited about recent developments, though, we still need to be wary about contingent risks from a revival of the economy, locally and globally. The rise in industrial activity will result to demands on resources that can outpace supply. Case in point: oil. As demand returns to the system and supply remains low, oil prices are rising significantly. Last October 19, unleaded gasoline prices spiked to over 70 pesos per liter. That is significantly higher than what the price was just a few months ago. Since the Philippines imports most of its oil requirements, the weakening peso is another cause for concern that could compound the rise in energy prices. And since petrol is an almost ubiquitous cost of production, the impact on commodity and transport prices is likely to be significant. Clearly, this will fuel inflation which, for September, is already estimated at around 5 percent.
The Bangko Sentral has so far kept interest rates low and kept liquidity in the market high. This, to help stimulate economic activity. However, should inflation continue to rise, it is likely that monetary authorities willreverse its policy stand. In turn, this might nip any nascent return to growth in the economy.Given the disruption wrought by the pandemic, economic fundamentals have been upended. Therefore, the revival in economic activity is not going to be an easy one.
Notwithstanding the potential pitfalls on the road to better days, we should not shrink away from the prospects that the reopening of the economy brings. Revenue is essential to revival. Being able to slay inflation is a much preferred problem than not being able to do business at all.
The Philippine economic fundamentals are strong and have been preserved. Remittances from overseas Filipino workers remain strong. Domestic consumption is still a driver of growth. The fiscal deficit – though increased due to COVID-19 borrowings – is still within acceptable levels.The government continues its pump priming and is expected to sustain infrastructure spending. Once the economic engines have warmed up, it seems certain that we will return to the vibrancy that we enjoyed prior to the pandemic.
The Philippine economy is re-opened for business. Let us keep the much-needed balance in living with the virus so we can continue to remain open.
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