Finance Secretary Carlos Dominguez III
MANILA – A top Cabinet official has assured the business community that the government is focused on saving lives not just from the coronavirus pandemic but also from hunger and other diseases that could happen as a result of the economic fallout from the global health crisis.
Finance Secretary Carlos Dominguez III said the government is fully aware that fighting Covid-19 should be done alongside efforts to rebuild the economy, given that unemployment and reduced incomes resulting from the lockdowns also have public health consequences.
“We cannot fight a pandemic with a weak economy; nor can we restore economic vigor without solving the public health crisis. We need a healthy people and a strong economy,” he said in his video message to participants of the 29th North Luzon Area Business Conference, which was organized online via Zoom by the Philippine Chamber of Commerce and Industry (PCCI).
Dominguez lauded private sector employers for their own brand of heroism as they continue to shore up businesses and help their employees survive in this time of crisis.
“We have seen much heroism from all sectors during the five months that the nation has been battling the Covid-19 pandemic. While our medical workers braved the frontlines to save lives and treat the infected, you, our entrepreneurs, worked day and night to shore up businesses and help your employees survive,” Dominguez said. “You have ensured continued access to basic goods and services. The country is grateful for your efforts.”
As for the government, Dominguez said it will continue to be judicious in its use of its fiscal and financial resources, considering that the global health emergency will likely be going to be a drawn-out series of battles, with no knockout punch against Covid-19 and its resulting economic crisis.
“We are therefore conserving our fiscal stamina for a full, 12-round fight. Our capacity to fight can and will outlast this health challenge,” he said.
Even though the Philippines may not have one of the biggest economic stimulus packages when compared to other countries, Dominguez said it has performed better compared to some economies owing to its fiscal strengths.
Citing data from various sources, Dominguez said that there appears to be no correlation between the size of a country’s stimulus plan and the coronavirus-induced contraction of its economy.
While the Philippine economy shrank by 16.5 percent in the second quarter with a stimulus package at 4.2 to 6.4 percent of gross domestic product (GDP), Malaysia’s economy contracted even more by 17.1 percent in spite of a bigger economic stimulus equivalent to 18.2 percent of its GDP, he noted.
The United Kingdom's (UK)’s total stimulus is at 23.4 percent of GDP but its economy went down by 21.7 percent. Sweden’s economy decelerated by 8.2 percent, despite having a bigger stimulus package of between 10.8 and 16.6 percent of GDP.
“It appears that no matter how much money countries pump into their economies, their GDP would have shrunk massively, anyway. It is not the sheer size of the stimulus package that matters now but also whether it is actually saving the productive parts of the economy,” Dominguez said.
“This is because the problem is not a systemic contraction or a cyclical bust. Simply, necessary mobility restrictions hamper aggregate demand,” he added.
Dominguez said the economy can recover if the country can keep the pandemic at bay so that tough restrictions such as wide-scale lockdowns are no longer necessary.
“Preventing outbreaks in the workplace is as much a lifesaving responsibility as it is a good business practice,” he reminded businessmen at the conference.
Dominguez said the effects of the pandemic would have been much worse had it not been for President Duterte’s prudent approach to fiscal and economic management as reflected in the Philippines historic low debt-to-GDP ratio of 39.6 percent, a 22-year high revenue effort of 16.1 percent of GDP, and infrastructure investments equivalent to 5.4 percent of the economy in 2019, as well as the unprecedented amount of USD98 billion in gross international reserves as of July this year, to name a few.
Without continued and increased public sector spending--especially on infrastructure, public health, and social protection--the economy would have performed much worse, Dominguez said.
The first semester GDP would have shrunk by 2.5 percentage points more than it did, or a total of 11.5 percent versus the actual 9 percent, he added.
He pointed out, however, that the worst part of the economic crisis may now be over as signs of recovery are emerging in the manufacturing sector and merchandise trade, along with increases in tax collections.
To further ensure an effective recovery plan and improve the post-Covid-19 business climate, Dominguez said the Duterte administration is supporting the swift approval of a "fiscally responsible" Bayanihan To Recover As One Act, which will provide another round of fiscal measures to stimulate consumer demand and support pandemic-hit businesses and individuals.
This proposed law, also known as the Bayanihan 2, is the first of five legislative imperatives that Dominguez said the Congress needs to act on quickly to ensure the economy’s strong and resilient recovery.
The other imperatives involve infusing additional capital to government financial institutions for them to be able to act as wholesale banks and fund substantial portions of loans that other commercial banks will provide to Covid-hit businesses, and allowing banks to dispose of non-performing loans and assets through asset management companies similar to special purpose vehicles.
Rounding up these legislative imperatives are the need to provide greater support to the agriculture sector by giving the banking system the ability to support the whole value chain of agri-enterprises; and the passage of the long-due Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) that will reduce the current 30-percent corporate income tax (CIT) to 25 percent immediately, extend tailor-fit incentives to investors and extend the period of the net operating loss carryover (NOLCO) for 2020 from three to five years.
The Duterte administration will also continue with the “Build, Build, Build” program as the “cornerstone of our economic recovery,” given its high multiplier effects of creating jobs, encouraging investments, and expanding economic activity, Dominguez said.
Northern Luzon stands to benefit from many of the projects under “Build, Build, Build” as this area is one of the centerpieces of this signature program of President Duterte.
These projects include New Clark City (NCC), whose first phase was completed by end-2019; the final segment of the Tarlac-Pangasinan-La Union Expressway (TPLEx) that was opened on July 15; Clark International Airport (CRK), which is 99.8 percent complete; Central Luzon Link Expressway (CLLE), which is scheduled for completion by end of 2020; and the Phase 1 of the North-South Commuter Railway (NSCR), which was 40 percent complete as of July.
“When the pandemic finally recedes, we expect our economy to resurge. I am hopeful that the business community of Northern Luzon will continue to partner with us at the frontlines of our economic revival,” Dominguez said.
He said while the pandemic remains, the government continues to beef up the capacity of the healthcare system and had earlier imposed the lockdowns to slow the rate of infections.
The latest data suggest that a little over 1 percent of all Covid-19 cases in the country are severe or critical, Dominguez noted.
The Philippines’ mortality ratio is at 2.5 people per 100,000 population, as compared to the United Kingdom at 70, Spain at 61, Sweden at 57, and the United States at 52, he said. (PR)
