ING Bank Manila senior economist Nicholas Mapa
MANILA – An economist of ING Bank Manila cited the need for a stimulus program that would encourage people to increase spending to ensure economic growth after the pandemic.
In a virtual briefing on Friday, ING Bank Manila senior economist Nicholas Mapa said the economic output relies heavily on consumption, which has been hurt by the movement restrictions when the government implemented various levels of community quarantine.
Mapa said the Philippines’ growth story has been primarily based on consumers and their concept of permanent income, with the latter as the main factor for them to spend or not to spend.
He said if people are confident in their income sources, they tend to spend more even on things that are beyond their needs, which, in turn, further boosts economic activities.
“So all these discretionary spendings across the board, right across social classes is what really drives the Philippine economy,” Mapa said.
However, with the loss of jobs that resulted from the effects of movement restrictions on companies’ operations, people would tend to keep their money and save it because of uncertainties, he said.
Mapa noted that investments would also be affected by the current situation.
“This could get worse pretty quick. And when you lose job creation, it’s like the entire Philippines will lose the reason for its very rapid growth,” he said.
Mapa forecast the country’s gross domestic product (GDP) at -6.3 percent for the second quarter from -0.2 percent in the first quarter, the first negative output since the last quarter of 1998.
Domestic output in the succeeding two quarters are projected to be at -5.8 percent and -3.5 percent, respectively.
Growth is seen to return to positive territory next year at 3.5 percent, 5.7 percent, 5,8 percent, and 4.5 percent for the first to fourth quarters.
Mapa said the Bangko Sentral ng Pilipinas (BSP) is carrying most of the weight right now after slashing key policy rates by a total of 125 basis points since the start of the year.
To date, the reverse repurchase (RRP) rate is at a record low of 2.25 percent, which he forecast to remain until the last quarter of 2021.
Mapa said the policy rate cuts of the central bank are not enough to address the gaps caused by the pandemic since these are lending measures that are not expected to greatly entice consumers to spend again.
He thus raised the need for additional fiscal measures from the government, as well as a contribution from Congress, such as the approval of the proposed Accelerated Recovery and Investment Stimulus for the Economy of the Philippines (ARISE) bill.
“For me, in terms of fiscal recovery plan, the more, the better because you have to cover more of that economic loss that we saw due to Covid(-19),” Mapa said. (PNA)
