It may take the Philippines until 2022, at the earliest, to return to its precoronavirus pandemic (COVID-19) growth path, but it is crucial for the government to jack up its pandemic intervention spending without worrying too much about its sovereign credit rating.
This is according to economist Ernesto Pernia, who stepped down as Socio-Economic Planning Secretary in mid-April amid the raging pandemic due to “differences in development philosophy” with some members of President Duterte’s Cabinet.
In a conference organized by the Shareholders Association of the Philippines (SharePHIL) last week, Pernia noted that the Philippines had “started very late” and “moved very slowly” in addressing the pandemic, thereby getting the “sorry” reputation of having the highest COVID-19 caseload and the slowest economy to recover in the region despite imposing the longest lockdown in the the world.
At only $21.45 billion or 5.83 percent of gross domestic product (GDP) or about $201.11 per capita, Pernia said the Philippines’ “parsimonious” COVID-19 response spending had been the lowest in the region. He noted that even Vietnam was spending much more at $26.5 billion or 10.12 percent of its GDP.
Indonesia, Malaysia and Thailand have so far spent $115.78 billion, $78.45 billion and $84.09 billion, equivalent to 10.94 percent, 22.07 percent and 15.96 percent of their respective GDP.
“Health and economy are intimately linked, they are also intimately interactive. Poor health is going to be bad for economic productivity and bad economy will hurt health through livelihoods and incomes. There’s really no trade-off between the two,” Pernia said.
“In this pandemic, it was natural that health was attended first but it should have been attended early on so that, with the health capacity strengthened, the lockdown can be gradually eased so the economy can recover faster.”
Pernia said the government had head room for much higher COVID-19 spending, adding that it could raise intervention spending to 10 percent of GDP, which would release another P1 trillion worth of funds that would have more impact on the health system and speed up economic recovery.
While the other countries in the region have been spending a lot more, none of them had suffered any credit rating downgrade, he said.
“This implies that credit rating agencies may have adjusted their norms,” Pernia said. “There is no fear that we may be downgraded because none of the other countries were downgraded.”
The Philippines—which currently enjoys investment grade rating from major credit watchdogs—has entered an economic recession for the first time since 1998. Second quarter GDP year-on-year contraction deepened to 16.5 percent from 0.7 percent in the first quarter. This was as it recorded over 365,000 COVID-19 cases and 6,900 COVID-19-related deaths so far. Globally, the caseload has breached 41 million.
For Pernia, it is imperative to fortify health system capacity, raise the remuneration of health-care personnel so they don’t leave for greener pastures and build or improve social infrastructure spending extending to the provinces. He welcomed Sen. Joel Villanueva’s “Doktor Para Sa Bayan” bill, which aimed to expand access to medical education and augmenting human resource for health.
He also advocated the urgent passage of the “Accelerated Recovery and Investments Stimulus for the Economy (ARISE)” bill, which is championed by Marikina City Rep. Stella Quimbo, who is herself an economist.
ARISE allots P1.3 trillion ($26 billion) for fiscal stimulus, such as infrastructure projects, financial assistance to businesses from 2020 to 2023, wage subsidies, cash-for-work programs for displaced workers, and zero-interest loans for companies.
“Spending in these areas of concern long overdue will magnify the impact of other economic stimulus, such as for physical infrastructure to include digital connectivity, social amelioration program and assistance for distressed small and medium enterprises,” Pernia said. INQ