Economic indicators ‘truly disturbing’ – PCCI

by Bernie Cahiles-Magkilat & Chino Leyco, Manila Bulletin, 21 Aug 2020

Gov’t says worst part may be over as signs of recovery are emerging

The Philippine Chamber of Commerce and Industry (PCCI), the country’s largest business organization, has warned that the country’s economic indicators are “truly disturbing” and called on the government to come up with a holistic approach to prevent the “continued downward spiral of the economy.”

But Department of Finance (DOF) Secretary Carlos G. Dominguez III said the worst part of the country’s 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.

In a speech at the 29th North Luzon Area Business Conference on “Strategic Innovation: Towards Economic Recovery, Resilience and Sustainability,” Ambassador Benedicto V. Yujuico, PCCI president, said he shared his frustration during a recent PCCI Board meeting as the PCCI advocacy for a holistic government approach in the fight against COVID-19 “fell on deaf ears.”

“I then expressed the sentiment that despite our persistent call for a holistic approach that will address the need to immediately restart the economy, and, at the same time, ensure compliance with health protocols, it seems we have yet to see a coherent game-plan that will hold back the continued downward spiral of the economy,” he added.

Yujuico described as “truly disturbing” official statistics showing the Philippine economy has plunged into recession as GDP declined by 16.5 percent in the 2nd quarter of 2020, and that 45 percent of the country’s labor force was jobless in July, 2020, or equivalent to around 27.3 million jobless adults.

He noted that these numbers do not yet include those in the informal economy.

“These figures are truly disturbing and indicate the dire need for an immediate and concerted effort by government and all stakeholders to get employment numbers back up and the economy back on its feet,” Yujuico told a webinar attended by President Duterte’s economic cluster head Dominguez and other government officials including Anti Red Tape Authority Director General Jeremiah Belgica.

The business leader also pointed to the unsustainability of the government’s social amelioration program.

“No government can continue to give helicopter or free money. The only sustainable way for our people to have food on the table is to allow them to work. This is not a matter of choice but of urgent necessity. No income for our kababayans means no money to buy the necessities in life. I don’t need to explain what will happen when there is widespread hunger and homelessness,” he added.

As early as April, the PCCI submitted a Roadmap to Recovery to President Duterte where the organization strongly advocated that quarantines and lockdowns be balanced with the need to revive gainful employment.

The PCCI issued subsequent several statements including opening public transportation following social distancing, health and sanitation protocols; increase the credit facilities for MSMEs; for BSP to consider the grant of regulatory relief measures, such as relaxation of rules on loan loss provisioning, and staggered booking of loan loss provision.

The PCCI also called for the deferral of taxes, penalties, and fees.

“We must request the Department of Finance to look more carefully into the issuances of the so called Letters of Authority that oftentimes just impose more hardships on all businesses.”

Some of the PCCI’s recommendations were heeded by the government but Yujuico said there are more policy recommendations that they will continue to pursue to support the recovery of businesses in the country.

Foremost of which is the immediate passage of the stimulus measures pending in Congress, particularly the ₱1.5-trillion ARISE bill or the Accelerated Recovery and Investments Stimulus for the Economy to arrest and avert the continuing fall of the economy.

PCCI has also batted for the passage of the CREATE (Corporate Recovery and Tax Incentives for Enterprises Act) bill.

“These bills, I believe, will help support our country’s recovery towards resiliency,” said Yujuico. In addition, the PCCI called on government to accelerate the implementation of the “Build, Build, Build” projects.

To strengthen the local business environment, the PCCI called for the streamlining of business processes by automating and integrating government transactions, particularly in securing permits and licenses.

Mobility, not massive stimulus

The Department of Finance (DOF) said that a massive stimulus package will not stop country’s economy from falling sick as long as there are mobility restrictions.

At the North Luzon Area Business Conference yesterday, Finance Secretary Carlos G. Dominguez III said that a shock to the economy is inevitable as long as there are mobility restrictions on businesses.

“The problem is not a systemic contraction or a cyclical bust. Simply, necessary mobility restrictions hamper aggregate demand,” Dominguez said.

For this reason, the finance chief believes that large economic stimulus will not help to soften the blow coming from the devastating effect of the closure on businesses and movement restrictions.

Dominguez said that even if the Philippines has a lower stimulus package, its economy still “performed better” than some countries with much bigger budgets in stimulating their economies.

He said that there appears to be no correlation between the size of a country’s stimulus plan and the coronavirus-induced contraction of its GDP.

“It appears that no matter how much money countries pump into their economies, their GDP would have shrunk massively, anyway,” Dominguez said.

“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,” he added.

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 GDP, Malaysia’s economy contracted even more by 17.1 percent in spite of a bigger economic stimulus equivalent to 18.2 percent.

The United Kingdom’s (UK) 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 10.8 and 16.6 percent.

Dominguez said the economy can recover if the country can keep the pandemic at bay so that tough restrictions such as widescale lockdowns are no longer necessary.

To further ensure an effective recovery plan and improve the post COVID-19 business climate, Dominguez said the government is supporting the swift approval of a “fiscally responsible” Bayanihan to Recover As One Act (Bayanihan 2).