Austerity, not expansionary plans
No new administration in the last 50 years inherited a worse economy than what President Marcos Jr. inherited from the Duterte administration: P13 trillion debt, humongous 2021 deficit of P1.6 trillion, 23 percent of Filipinos still wallowing in poverty, irresponsible use of the pandemic budgets due to operational negligence and significantly due to barefaced corruption.
In short, the country should now be in austerity mode and belt-tightening, not expansionary. Good to dwell and dream together with the new president on the medium-term progressive economic horizon ahead, such as continuing with the “Build, Build, Build” projects, even if the country is already hobbling with debt. But we must first cope with present survival needs, versus realistic income generation capabilities in the next two years at least. What we need instead is an economic crisis management plan.
The country’s biggest problem is the extreme shortage in the sources of government revenues; the main source of that is, however, nowhere with lackadaisical business performance. We are still in the denial stage of the fact that the economy mainly depends on the performance of 99.5 percent of the business firms in the country; micro, small, and medium scale enterprises, all crowding in the domestic market and depend a lot on government spending, which in turn depends on revenues from the MSMEs. Many MSMEs cannot pay minimum wages. They need coaching on generating more revenues in profit-sharing partnerships with their workers on accelerating their company productivity. Unless underproductivity is addressed, the vicious cycle will continue; the government cannot wait for the MSMEs to rev up in their activity by themselves. We have seen that the MSMEs roughly numbering one million only employ an average of 20 workers or a rough total of 20 million of the 45 million work force. That explains why the country‘s high 23 percent poverty level is one of the worst in the Asia-Pacific region.
Crisis management will need tight oversight by the country’s economic managers, led by Finance Secretary Benjamin Diokno. New tax measures being planned to fill the gap will just worsen business activities. Medium-term economic plans that entail high spending on infrastructure projects may be pursued but should be revenue-neutral, and not add to the budget deficit burden, by adopting extensively public-private partnership programs in developing infrastructures and industries.
The only way this country can survive with sky-high debt trap, operating deficits, and the looming crisis of possible worldwide recession is for the economic managers led by Diokno to come front and center and tightly manage the palpable economic crisis. Mr. Marcos and Congress should be held back from any ill-conceived fiscal expansionary mode.
Marvel K. Tan,[email protected]
