LOCAL economists have expressed concern that another strict lockdown would not only result in deeper economic contraction but could also worsen poverty and hunger.
They issued the statement after President Duterte said in his last State of the Nation Address (Sona) that should the Delta variant of Covid-19 spread, he would be “more strict” on mobility restrictions.
De La Salle University’s Maria Ella Oplas said this is a cause for concern especially since many Filipinos are “barely surviving” with dwindling savings while millions remain jobless.
“People are barely surviving with their savings. Businesses are bleeding. Our financial sector is in turmoil and is on the verge of collapsing because of nonperforming loans,” she told the BusinessMirror.
“Another lockdown may result in people not getting Covid but they will die because of hunger and worse, [poor] mental health.”
Unionbank Chief Economist Ruben Carlo O. Asuncion said the spread of the Delta variant will cloud recovery prospects especially in the second half. Unionbank expects the economy to grow by an average of 6 percent in July to December.
“This would definitely be lower if another lockdown happens. Thus, it will impact our average 2021 growth estimate of 4 percent to a further downside.”
With the possibility of another lockdown, Ateneo Center for Research and Development Associate Director Ser Percival K. Peña-Reyes told BusinessMirror the government must remember the importance of tradeoffs.
Peña-Reyes noted that as it is, the government is already “trying to muster” its resources just to address the crisis. Eventually, this will have an impact on the country’s debts moving forward.
However, Peña-Reyes said, there is a need to instead spend the government’s borrowings on key factors that will boost recovery efforts such as vaccines.
“A surgical approach to the easing of restrictions across regions and sectors can be done in parallel. The spending should be done such that we stimulate economic growth that outpaces debt growth.”
If this is not done, he said government will consider employing austerity measures and cut government spending or raise taxes. Given the current situation, Peña-Reyes said this may even be harmful to the economy and dampen economic growth further.
“I cannot give an exact answer to [what will be the impact of another lockdown on the economy], but it’s not far-fetched to think that it could lead to a contraction yet again,” he said.
Neda: focus on protocols
However, the National Economic and Development Authority (Neda) would rather focus on the prevention of a lockdown by following protocols.
Socioeconomic Planning Secretary Karl Kendrick T. Chua told the BusinessMirror this will help minimize the impact of the Delta variant on Filipinos and the economy as a whole.
“The risks from virus are still with us and we need to manage the risks. High risks areas and activities will need to be contained while allowing the rest of the people to earn a living,” Chua said.
He said quarantine restrictions and the fall in consumption translated to a total income loss of around P1.04 trillion in 2020 or an average of P2.8 billion a day.
Quarantine restrictions led to an average annual income loss of P23,000 per worker. However, he said this average masks wide differences across sectors and jobs, and some workers are hit much harder, especially those who lost their jobs.
‘Historic legacies’
Lawmakers expressed confidence the reforms endorsed by Duterte would still be approved before his administration ends in June next year.
Majority Leader Martin Romualdez and House Committee on Ways and Means Chairman Joey Sarte Salceda said the House will act immediately on the important measures Duterte listed.
Romualdez said they will prioritize the approval of Philippine Virology Institute Act and Center for Disease Control Act.
The House has sent to the Senate the bills amending the Public Service Act, Foreign Investments Act, proposed Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) and Passive Income and Financial Intermediary Taxation Act (PIFITA).
Salceda said passage of the amendments to the Public Service Act, the Foreign Investments Act, and the Retail Trade Liberalization Act will also be crucial to creating new jobs and opening new businesses.
Duterte had asked Congress to pass proposals to create the centralized department for Overseas Filipino Workers (OFWs) concerns, Center for Disease Control (CDC) and Department for Disaster Resilience (DDR).
These bills on OFW and CDC were approved by the House while the DDR is pending before plenary debates.
Duterte also called for the Modernization of the Bureau of Fire Protection. The proposal is now awaiting ratification from both Houses.
Salceda lauded Duterte for setting the country’s economic policy direction for his administration’s final year.
“The first reform he sought for was the Military and Uniformed Personnel Pension Reform. He was clear that it is linked with our ability to pay the MUP [Military and Uniformed Personnel] and to upgrade our defense capabilities. It is crucial to ensuring funding of our defense modernization program.”
The Special Ad hoc Committee on MUP, also chaired by Salceda, has approved the substitute bill on the proposed MUP pension law.
Moreover, Salceda said President Duterte highlighted the need for retooling and reskilling, led by the Technical Education and Skills Development Authority (TESDA), in employment recovery, along with vaccinating qualified employees.
“I have strongly recommended a stronger role for TESDA in national development as its own cabinet-level department,” he said.
Salceda also lauded the President for the “historic legacies” of his administration in socioeconomic development.
“His comprehensive tax reform program, the most ambitious tax reform program in the country’s history since the codification of tax laws in 1997, is hailed across the globe as a model for public resource management and public investment. Indeed, average revenue-to-GDP rates under President Duterte, at 15.3 percent of GDP, are at their highest since the 1997 tax reform under Ramos.”
Economic reforms
The American Chamber of Commerce (AmCham) is optimistic that Congress will pass the priority economic bills mentioned by President Duterte during his last State of the Nation Address (SONA) on Monday.
AmCham said it welcomed the inclusion in the SONA of the economic reforms expected to hasten the country’s recovery from the pandemic.
These include the amendments to the Foreign Investment Act, Public Service Act and Retail Trade Liberalization Act. In addition, Duterte also mentioned the proposed establishment of the Department of Disaster Resilience.
The Congressional leaders, as noted by the AmCham, said they also hope to pass the proposal for disaster resilience department creation, ease of paying taxes, Philippine creative industries and the remaining tax reforms.
“We see these as strong signals that the bills mentioned are being prioritized for passage soon. They will support economic recovery in the years ahead,” AmCham Executive Director Ebb Hinchliffe said in a statement.
Image credits: AP/Aaron Favila