THE cochairman of the House Economic Recovery Cluster on Tuesday warned that the government’s high current account surplus—which means that there are greater savings than investments in the economy—is a “troubling sign,” saying the country’s spending has to be quicker and more effective during a crisis.
House Committee on Ways and Means Chairman Joey Sarte Salceda made a statement in response to an economic bulletin by the government showing the current account in the balance of payments rose to a surplus of $8.7 billion or 2.4 percent of GDP during the first three quarters of 2020.
“You want people to save during high growth years, but you want them to invest during periods like this. It’s countercyclical to save during a crisis. If we don’t induce firms to invest more by ramping up government spending, we’re in for extended economic sluggishness,” Salceda said.
The House leader also called out stimulus-implementing agencies for their slow action.
“The reason we kept pushing for a Bayanihan III that is more focused on income transfers is precisely that supply-side interventions such as those in Bayanihan II take some time to make a positive impact. Demand always matters more, when you are a government trying to intervene. Supply will follow if people have the money to spend on things,” Salceda added.
According to the bulletin, the current account balance reverted to a surplus from a deficit last year as the economy slowed down, bringing down import demand with it. As a result, the peso strengthened from end-2019 level of P50.8/$1 to P48.1/$1 as of mid-December 2020.
“There is this misguided notion that having less imports than exports, and having more savings than investments, is always a good idea. Not during a demand-side crisis. And certainly not in our stage of development, where we need high-value goods and services to jumpstart new industries,” he said.
“The principle should be simple: Spend quick. Spend wisely. Spend enough. There is still an opportunity to redeem our response, as we are extending the validity of Bayanihan II. But that is not a signal that the implementing agencies can just relax. We have to spend it all and soon,” Salceda added.
Meanwhile, Salceda also called on the national government to buy and compete for vaccine supplies.
“The silver lining here is we can definitely buy vaccines, as the peso is strong and our credit ratings are robust. So, let us not try to cut too many costs anymore. Let’s buy the most effective and easy-to-administer vaccine. We can buy the best, anyway,” he said.
“The point of not being so generous with our fiscal stimulus after all was that so we can buy vaccines when they become available. The vaccines are now here. So, let’s buy them already. Compete in bidding if necessary. The losses of every single day we remain on quarantine are bigger than any increase in vaccine costs anyway,” the lawmaker added.
According to the solon, the economic loss of every day in quarantine is about P8.5 billion in economic activity.
“Not to mention the opportunity costs—what could have been. Bid, compete, do whatever it takes to get viable vaccines. Congress will be all-out in supporting government to make sure there are no delays,” Salceda said.
Image credits: PCOO
