Salceda sees 9.6% Q2 contraction; pushes 2 bills’ ok

By Jovee Marie de la Cruz, Businessmirror, 1 June 2020

THE Philippine economy could contract to as deep as 9.6 percent in the second quarter of the year with the continuing impact of the Covid-19 pandemic, the House Ways and Means panel chairman said at the weekend.

Albay Rep. Joey Sarte Salceda said there is still a chance the country might enter a period of positive growth during the year if Congress approves the proposed P1.3-trillion Accelerated Recovery and Investments Stimulus for the Economy (ARISE) and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

“Q1 GDP growth was -0.2 percent, but the real cost is the opportunity cost. We economists speak in terms of that. What could easily have been, versus what the actual GDP growth figures were. Considering we could have easily grown by 6.5 percent in Q1, the opportunity cost is essentially around 8 percent of GDP for that quarter,” said the analyst-lawmaker.

“As for Q2, I would not be surprised if the GDP contraction hits double digits, although a good estimate would be between a quarterly GDP growth of -6.5 percent to -9.6 percent. Again, considering opportunity costs, that’s easily a cost of 13 percent to 16 percent more of quarterly GDP that could have been realized if we were under normal circumstances,” he added.

Salceda said if the country enters negative growth during the third and fourth quarters, its ability to achieve poverty reduction and countryside development goals will be significantly delayed by several years.

“That is why while we still can, we have to boost the economy with the right signals—one, that we are fully capable of rooting out Covid-19; two, that we will support the economy through a sufficient spending plan; and three, that we will support business expansion through CREATE, the new Citira [Corporate Income Tax and Incentives Reform Act],” he said.

Improving performance

Meanwhile, the House leader said improving the Department of Health performance is the key to unleashing the creative powers of the stimulus measures meant to revive a Covid-devastated economy as lockdowns in the pandemic shuttered most businesses.

“Stimulus won’t work and will just be wasted in a lockdown. Ultimately, it is all about confidence—confidence in health, confidence in incomes, confidence about employment, confidence in growth in that order,” he said.

“Both those said figures are almost entirely behind us now, and any damage those figures would have meant was already incurred. What matters now is how do we recover from this?” he said.