IMF urges tweaks in COVID-19 policy responses as economies emerge out of lockdowns

MANILA, Philippines — Key to better addressing the health and socioeconomic crises caused by the COVID-19 pandemic will be adjustments in policy responses as countries emerge out of their respective lockdowns, according to the International Monetary Fund (IMF).

“The policy support needs to shift when you reopen and when you go through the various stages of this. And that’s hard because there’s obviously political dynamics at play, and there’s uncertainty that lies ahead,” IMF first deputy managing director Geoffrey Okamoto told Asian journalists during a media roundtable Tuesday night.

Okamoto was responding to the Inquirer’s question if the Washington-based multilateral lender had assessed how effective the monetary and fiscal responses of governments were in fighting COVID-19.

For Okamoto, “reopening, rebuilding or stabilization—return to growth phase is going to require different policies and that, in some instances, means removing some policy support that you may have had in place three months ago because keeping that in place may actually have more distortive effects than there are benefits, but obviously this differs country by country.”

In the case of the Philippines, Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua had said the country was already done with the COVID-19 “emergency” stage addressed by the responses under the Bayanihan to Heal as One Act and the enhanced community quarantine (ECQ) imposed since mid-March, such that we were now in “recovery” stage.

For the economy to recover during the second half of the year, the economic team was pitching the P173-billion Philippine Program for Recovery with Equity and Solidarity (PH-Progreso) stimulus package.

PH-Progreso included the extension until yearend of the Bayanihan Law, and passage of Financial Institutions Strategic Transfer (Fist) and Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (Guide) bills—capital and spending support to businesses and consumers, respectively, by providing liquidity to banks and firms; as well as the Create bill aimed at slashing companies’ income tax rate to 25 percent as soon as July while providing flexible fiscal perks to investors.

Another multilateral lender, the Manila-based Asian Development Bank (ADB), last week noted in its updated COVID-19 policy database that the Philippines’ war chest stood at $20.078 billion as of June, as such breached the P1-trillion level.

The authors of the ADB database led by adviser Jesus Felipe said they included the sum of the measures that provided liquidity, encouraged credit creation by the financial sector, and directly funded households, businesses and/or state/local/regional governments amid the pandemic.

The Philippines’ measures to fight COVID-19 were equivalent to 5.46 percent of gross domestic product (GDP).

If divided among the population, the package per capita was $188.26 or over P9,300 for every Filipino.

The sum of the Philippines government’s COVID-19 policies was the sixth-largest in Southeast Asia, after Thailand’s $84.1 billion, Malaysia’s $64.2 billion, Indonesia’s $59 billion, Singapore’s $55.4 billion, and Vietnam’s $26.4 billion, while exceeding Cambodia’s $2.1 billion, Brunei Darussalam’s $318 million, Timor-Leste’s $254 million, Myanmar’s $99 million, and Laos’ $10 million.

Felipe told the Inquirer last Sunday that “simply assuming that a bigger package is better, is incorrect.”

“It is a question of understanding the needs of the country and addressing them appropriately,” Felipe said.

While it was still difficult to say whether or not the COVID-19 response to date had been effectively addressing the health and socioeconomic fallouts caused by the pandemic, Felipe noted that “the package of the Philippines is increasing.”

/MUF