They are playing with our lives

I cannot believe it. In the face of an unprecedented and disastrous contraction of the Philippine economy of 16.5 percent in the second quarter of 2020, the Bayanihan 2 budget is allocating only P140 billion—with another P25 billion as a “standby” fund if the money can be raised by the Department of Finance (DOF)—to get the economy going? That is like giving a couple of aspirin as a cure to a patient who is hemorrhaging heavily from a stab wound.

And the legislators are actually congratulating themselves for doing a good job, because they are staying within the bounds of what the DOF told them was available. Let the poor Filipinos fend for themselves. What’s the matter, folks, haven’t you heard of borrowing? Oh! We might lose our good credit ratings from Standard & Poor’s or Fitch, you say? Are you crazy? Millions of Filipino lives and jobs on the line, and you are worried about your credit reputation? Unbelievable. Don’t we ever learn?

Think of it, Reader. The country has to get back after its output (GDP) has contracted by almost a fifth, with household consumption down, micro-, small- and medium-sized businesses falling by the wayside, and 17.7 percent of its labor force unemployed. And the government thinks it can turn things around by allocating the equivalent of 0.7 percent (that is not a typographical error) of 2019 GDP on these problems? Compare that, please, with the COVID-19 response measures of Indonesia (7 percent of GDP), Thailand (9.6 percent), and Japan (21.1 percent). You don’t have to be a rocket scientist to know how our efforts will end.

I know what you will say, Reader. That this is already the second package. The first was the Bayanihan to Heal As One (Bayanihan 1). Well, I was coming to that. That package was worth P390 billion, or almost 2 percent of the 2019 GDP. Bayanihan 1 was passed on March 25, just in time to help the economy in the second quarter, right? Well, according to the Citizen’s Budget Tracker (an NGO tracking our COVID-19 fiscal response), as of June 29, or about the end of the second quarter, the government had spent only 68 percent of that, or roughly 1.3 percent of GDP. And that’s when the shit hit the fan for Philippine GDP. It is obvious that had all of that 2 percent of GDP been spent, the country would have fared better.

But think of it, Reader. We spent 1.3 percent of GDP on our COVID-19 response, and the economy contracted by 16.5 percent. So now our leaders, in the third quarter and fourth quarter of the year, are prepared to spend in Bayanihan 2 about 0.7 percent of GDP (okay, 0.8 percent with the standby fund), and they think that we will do better? How inept can they get? What logic is that? They are playing with our lives.

Actually, this is déjà vu all over again. I remember when the Philippines was trying to recover from its debt crisis we inherited from Ferdinand Marcos, where the economy contracted by 10 percent. In 1986, the International Monetary Fund (IMF) hadn’t learned its lessons yet (that would come after the Asian Crisis in the ’90s), and it insisted we keep to very low (yes, it suggested zero) budget deficits, just so we could satisfy our creditors. You may be too young to remember, Reader, but the growth performance of the Cory administration was an average of 3.6 percent for her six-year term, and I attribute it to the wrong priorities of the IMF, which had us by the scruff of our necks.

Do we want that now? Now, though we may not have the IMF to contend with, the wrong priorities or the ineptitude still remain. We must maintain our credit standing at all costs.

The only shining light I can see, insofar as our economic management is concerned, is the performance of the Bangko Sentral ng Pilipinas (BSP). I had reservations when Ben Diokno was appointed governor (I thought that as a public finance expert, he should best remain in the Department of Budget and Management), but I take it all back. The BSP has done all, and more than its share, to keep the economy going—including a dividend payment of P20 billion to the government (it is no longer required to do so) and a series of regulatory relief measures for the banking sector, in the hope that the banking sector will, in turn, provide financial relief to their borrowers.

Fat chance of that. The financial and insurance activities sector is one of only three service subsectors (the other two are information and communication, and public administration and defense) that grew in the last quarter’s disaster.

—————-

[email protected]