The Philippine government has imposed several community quarantine measures in different parts of the country to curb the spread of the virus since then, causing the shutdown of local businesses and countless job losses.
The adverse effect of the pandemic on ordinary people and local businesses underscores the need for a comprehensive economic recovery plan. The coronavirus crisis has already caused the Philippine economy to contract for the first time in 22 years and the unemployment levels to shoot up to a record high in the first quarter of 2020.
To cushion the blow, the government has so far launched different economic measures during the pandemic. These range from fiscal support provided by the government for the income generation of households, businesses, and local governments in the country, to monetary policies undertaken by the central bank.
Yet when compared to the stimulus packages launched so far by neighboring countries in Southeast Asia, the Philippines ranks at the lower end of the spectrum. Not only is the amount comparatively small, other smaller economies in the region have also spent more on their respective populations than the Philippines.
There is now a clamor for a bigger, more comprehensive economic stimulus package that would effectively jumpstart the economy and solve the crisis at hand. But efforts to pass bills seeking to grant larger stimulus packages have been shut down, too, by the government’s economic managers.
The Philippines has allocated an estimated P1.07 trillion for different measures, including fiscal and monetary, as economic response to the pandemic as of July 13 according to the COVID-19 Policy Database by the Asian Development Bank (ADB). This is equivalent to about 5.9% of the country’s gross domestic product in 2019.
Almost half of the Philippines’ total package, or P523 billion (48.8%), went to government support for the income of households, businesses, and local governments.
The bulk of it, or P464.4 billion, went to non-health-related measures such as the emergency subsidy program for low-income families and the wage subsidy program for micro, small, and medium enterprises (MSMEs). The remaining P58.6 billion went to health-related support, such as the purchase of medical supplies, and assistance to health workers and COVID-19 patients.
About 24.7% or P264.3 billion went to liquidity support as alternative reserve compliance by banks through loans to large enterprises and MSMEs. Another P120 billion (11.2%) was for loan guarantees for small businesses.
Yet despite being able to address the key issues, many Filipinos are still suffering from the impact of the lockdown. Economists say this can be traced to two main factors: implementation of the programs and the size of the economic response. (READ: 3 months after lockdown, poor Filipinos still hungry waiting for cash aid)
“Priorities were well set but the speed at which the remedy was delivered and the duration of its execution may not have been enough to fully shield the economy from the pandemic,” Nicholas Mapa, senior economist of ING Bank Philippines, said in an email on July 23.
Mapa added that fiscal spending is crucial to address the problem. He said expenditures should be twofold: first on healthcare systems, then outlays to boost consumer sentiment – such as measures that will safeguard job security via subsidy or support for companies.
Sonny Africa, executive director of nonprofit think tank IBON Foundation, also said that the government is still not spending enough to revive the economy.
“[The government] really has to spend amid the worst economic crisis and decline in Philippine history. The government has to step in to spend, but it’s really not spending,” Africa told Rappler via a phone interview on July 23.
He said the country’s economic development during the pandemic is hampered by the government’s reluctance to spend more on economic stimulus programs.
In June, the House of Representatives passed the Accelerated Recovery and Investments Stimulus for the Economy of the Philippines or ARISE bill, which seeks to spend P1.3 trillion as an economic stimulus strategy for the country’s growth and development in the aftermath of COVID-19.
Top economic managers of the country, however, have repeatedly said the bill is “unfundable” due to constitutional constraints.
Finance Secretary Carlos Dominguez III also said in a forum in June that the administration’s strategy is to maintain a prudent fiscal program to protect the country’s creditworthiness, so that commercial markets and development partners would continue to lend to the Philippines at generous interest rates and longer terms.
Mapa, however, said the situation is different now with the pandemic. “Authorities have indicated that such a bill is 'unfundable' based on constitutional grounds but the phrase ‘extraordinary times call for extraordinary measures’ has been brandished and utilized several times during 2020 and we do not see why it cannot be deployed for this purpose,” he said.
In Southeast Asia, the Philippines ranks as the 4th country with the smallest coronavirus economic response in terms of share of GDP.
The per capita distribution of the total coronavirus packages launched by the Philippine government ($197) so far also trails behind smaller Southeast Asian economies, such as Brunei ($742) and Timor-Leste ($200).
Africa said the Philippines’ position today reflects the government’s apprehension about spending and too much regard for creditworthiness.
“Truth be told, there’s no stimulus happening. We are really in an austerity mode. In a time when both the local and global economies are crashing, when the only institution you have that has the resources to intervene chooses not to intervene, it’s a huge sin of omission,” Africa said.
Africa pointed out that countries such as Indonesia and Vietnam both have lower credit ratings than the Philippines, but they have spent more on their respective populations during the pandemic.
“Our neighboring countries who aren’t bragging that much about it [creditworthiness], they’re actually doing more to help their people and their economy,” Africa said.
In June, the business community also called on the government to increase its economic stimulus spending. Forty-four business groups signed a statement asking lawmakers to expedite the passage of the P1.3-trillion ARISE bill.
“A law along the lines of ARISE would act on the lessons that many countries are heeding from previous recessions: that swift, substantial intervention is needed. The administration’s fiscal management has provided the financial strength and fiscal space to do this,” the business groups said.
Like the business groups, Mapa said he fully supports the ARISE bill, too, and called it “by far the most promising COVID-19 rescue package” yet. “Should we continue to delay and downgrade our stimulus efforts, we may not have a next year to come back to with the Philippines entering a lower growth trajectory,” he said.
Meanwhile, Africa has some reservations about the bill but nonetheless said it is more appropriate for the situation compared to the Bayanihan to Recover as One bill, which only has a P140-billion “standby fund.”
“[The] big weakness of ARISE bill – even worse under the Bayanihan 2 – [is that] they’re not giving enough money to poor households and even middle-class households, to maintain their spending, to make the supply side measures actually mean anything,” Africa said. “But at least the magnitude, it’s more appropriate. Currently, [ARISE’s] P1.3 trillion is more sensible than the meager P140 billion of Bayanihan 2.”
Both Bayanihan 2 and ARISE bills are still pending in Congress. Bayanihan 2 was not passed on third and final reading before the session adjourned in early June.
As well, only the House of Representatives has, so far, approved the ARISE bill on June 4.
As the Philippines continues to record thousands of new coronavirus cases each day, both Mapa and Africa said the need for a stimulus program becomes more crucial.
“The whole point of the stimulus spending was to arrest the problem. And the problem was, because we went into lockdown and we were scared to go out, the aggregate demand and production – or aggregate supply – were repressed. So in other words, the time to intervene is the time it’s happening. Basically, the longer the government takes to pass the stimulus bills, the worse the problem is going to be and the less effective,” Africa said. – Rappler.com