Philippine Economy and Covid 19

The Philippine economy and COVID-19
CROSSROADS TOWARD PHILIPPINE ECONOMIC AND SOCIAL PROGRESS - Gerardo P. Sicat (The

Philippine Star
) - April 8, 2020 - 12:00am
The effect of coronavirus disease 2019 or COVID-19 on the Philippine economy for the
rest of the year deserves attention.
The good prospects entertained for 2020 have been shattered by the onslaught of the
pandemic, which required extreme measures that has put the economy to a halt.
Assessing the immediate future. What is in store as the government navigates what

needs to be done? What are the main trade-offs and options that can be taken to
restore and protect the economy?
Equally important are the programs for the long-term future. The Philippine economy
has been on course to fire up its engines and that requires major economic reforms still.
Economic instability in the past, plus the failure to correct long-term defects in the
investment climate, have produced insufficient dynamism.
The Asian Development Bank (ADB) commented recently on the Philippine economy in
relation to the effects of the COVID-19 pandemic. It supposes that the Philippines
“might shed more than four percent of GDP from a domestic COVID-19 outbreak, on top
of a smaller two percent of GDP impact coming from global spillovers.”
“Risks are tilted to the downside,” the ADB report said. “The main downside risk to GDP
(gross domestic product) growth in 2020 comes from COVID-19 and is, therefore, highly
unpredictable. The impact on the economy will be larger than currently assumed if the
global outbreak is prolonged beyond the first half, or if there is a sustained prolonged
local transmission in the Philippines,”
Four plus two is six. The economic growth target for the year is in fact at least six
percent per the economic development plan. This almost means wiping out any growth
for the year.
However, the ADB leans toward the optimistic because growth could be restored in the
second half of the year through helpful government interventions. It foresees a two
percent economic growth rate for 2020.
The government economic response. The government’s economic response was to

cover the needs of the extreme medical measurers which could last three months.
Congress enacted in a special session additional powers to enable the President to
manage the new crisis. This is Republic Act 11469 known as “Bayanihan to Heal as
One Act.” The law gives the President the power to reallocate and to reprogram P275
billion (or 62 percent) of the already approved P438 billion budget for 2020.
Mainly, this is to enable the government to deal with the budgetary needs of providing a
wide social protection network for the citizenry and to pursue the fight against the
pandemic.
The steps taken will provide subsidies to those deprived of income resulting from loss of
work due to the lockdown measures of government. The money is intended to replace
the wages they would have earned in employment. It also includes some supplements
for the targeted Pantawid program to help very poor families due to the COVID-19
crisis.
In short, the subsidy is like “helicopter money” to help those who have lost purchasing
power arising from the lockdown measures.
If implemented quickly and in a timely manner for those in need, the measure would
make up for lost demand (or purchasing power) in the economy.
In addition, the law would allow the government to temporarily take over or direct the
operations of public utilities and privately owned health facilities, including the
distribution and storage of medical relief during the public emergency.
The inevitable impact of the lockdown measures was to create dislocation of the
economy. Much more than amelioration of the economic conditions, is the need to
protect the economy to restore economic activity and to resume growth. Demand needs
to be restored and the sinews of the economy have to flex somehow.
With many developing countries facing the prospects of a deep recession , the
Philippines could further turn to institutions that will assist in weathering the storm. The
government could take advantage of the facilities that multilateral global institutions are
offering to mitigate the impact of COVID-19 and help restore economic growth.
The IMF and the World Bank, and other development banks are devising programs to
help those challenged by the pandemic.
Government economic managers are studying how, with the assistance of these
institutions, the path toward growth might be helped. The government has to adopt
important fiscal and monetary policies to help restore the path of growth.
Finance Secretary Carlos Dominguez is studying the preparation of such programs to

improve the economy’s recovery. Much more needs to be known, he says, on the
nature of economic support from the assistance programs.
The COVID-19 pandemic, however, has changed the outlook for many economies. For
the Philippines, the threat would likely be centered on a weakening Balance of
Payments position that has to be propped up . Or a respite must be provided while the
rise of government spending and the fall of revenues has weakened the fiscal position
of the government.
In such cases, support from the external institutions would be justified. Such support
would also strengthen the economy’s recovery.
Such programs would make it possible to continue the Build Build Build programs of
infrastructure expenditure. These major projects could be finished more quickly if the
government had much more support from multilateral lending institutions.
Economic crises as reform opportunity. Let’s not forget the adage that economic
crisis often makes difficult reforms. This takes wise, insightful and persuasive
leadership. Hopefully the crisis makes possible the overcoming of obstacles that
prevent good reforms from taking place.
Still missing, in my view, are improvements in the country’s program of attracting more
investments in the country. The passage of the following reforms would immensely help
the cause of rapid development: (1) Passage of the TRAIN 2 dealing with investment
incentives, the component of reform addressing investment incentives.(2) The reform of
labor laws. And (3) The amendment of the restrictive economic provisions in the
Constitution.

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The Philippine economy and COVID-19

CROSSROADS TOWARD PHILIPPINE ECONOMIC AND SOCIAL PROGRESS - Gerardo P. Sicat (The

Assessing the immediate future. What is in store as the government navigates what

The government economic response. The government’s economic response was to

Finance Secretary Carlos Dominguez is studying the preparation of such programs to

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