ON Monday, July 27, President Duterte will make his Fifth State of the Nation Address. This Sona should be focused on one thing—addressing the impact of Covid-19 to the country in the next two years. We said this because the gains in the sociopolitical and economic landscape in the last four years have been basically pushed back by the rampaging impact of the virus. For instance, it is unlikely that we will be able to achieve the 14 percent poverty rate target by 2022, which was so close to being overtaken by 2021 as the 2018 levels have already reached 16 percent. The gross domestic product targets will have to be set aside as growth in the coming years will likely be subdued as the economic impacts of the lockdowns roll to the different sectors. The goal of this next two years should be to protect the capacities and resources of our people and firms so that they can fully participate in the economy during and after the pandemic.
Addressing Covid-19 over the short term should be decisive, coordinated, clear and sustainable. Hence, the Sona should be unpacking how we are to co-exist with the virus in the next two years and not on a bi-monthly basis. This requires government to focus all its energies and resources on this fight and not be distracted by ill-timed so-called reforms. This can be started by having a clear vision on how the co-existing with the virus will work. As we have ramped up our testing capacities, people are perplexed why the number of Covid-19 positives keep on increasing. This clearly points to unclear and confusing messaging on how we are to proceed in the economy. The efforts of the Presidential spokesperson to have a daily presscon is a good venue but is not reassuring enough to bring confidence to both consumers and business. What is needed to assure our people is a unified, standard and clear guidelines and protocols for testing, tracing, isolating and treating Covid-19 positives. The appointment of point persons to these different components will still need a single concrete step by step process when translated to the ordinary people needing to go to work and businesses needing to operate. The Department of the Interior and Local Government should be focusing its attention on how to model this to local governments. A national campaign that is unified, standard and persistent should be initiated along this line, this includes the process of helping stranded individuals and returning workers.
In addition, resources have been released by the Department of Budget and Management. More than 90 percent of the 2020 budget has been made available including realignments to help fight Covid-19 and help the economy. However, we are again facing the perennial absorptive capacity challenges that have been preventing us in maximizing growth in the past. The bottlenecks are most likely administrative and capacities in nature and are to be addressed the soonest. Our people cannot wait. Some 8 million people have lost jobs as of April and this probably has gone higher in the last two months. The Department of Trade and Industry secretary has recently announced that 26 percent of firms have closed and about 50 percent are partially operating. The balance are fully operational. Of those operating, the income is down by 90 percent. There is no confidence for consumers to go out. Clearly, businesses need to be assisted in the coming months so that they do not close permanently, adding more unemployed people. Government has lined up loans for these firms, but anecdotes have shown that businesses do not have the appetite for loans as sales will not be enough to tide them over. Hence, the better strategy is to subsidize the operations of firms at least in the next six months.
The Bangko Sentral ng Pilipinas also has released about P1.7 trillion to the economy, making it liquid. But if firms will not borrow then the liquidity will not have significant impact. Considering that banks have good loan loss provisions and the non-performing loans ratio remains low, BSP might want to consider extending further the deferment of loan payments of operating firms and mortgages of households till the end of the year.
All told, these are telling us that the biggest issue that we are facing is the lack of confidence. When people are unsure, uncertain and unclear or confused with various information, they will not have the confidence to move in this delicate environment. Addressing the situation as to co-exist with the virus with the proper guidance and direction in specific situations should help people and businesses navigate the way in a careful yet productive manner. The implementers can also shift tactics from a stick approach to a carrot approach. As one of my graduate students suggested, why not incentivize those LGUs without any Covid case for the last three months. Of course, there is a lot needed to make it worthwhile, but it is a start in the way we need to change our approach in dealing with this virus.