MANILA -- The government needs to further implement targeted policy support to address the coronavirus disease 2019 (Covid-19) pandemic’s impact on the Philippine economy, a report by UnionBank’s economic research unit said.
The report cited analysts’ comparison on the economic situation of the Philippines during the 2008-2009 global financial crisis (GFC) and the current condition which is considered to be “worse” because of the Covid-19 pandemic.
“If we are going to take their initial assessments seriously then, the response to this pandemic should be stronger and the scope bigger,” it said.
During the financial crunch in the previous decade, the report said the Philippine government’s fiscal policies included the institution of a PHP330-billion economic resiliency plan (ERP), which accounts for about 4.1 percent of gross domestic product (GDP); a PHP160-billion fund for higher spending by the national government for community-level infrastructure projects and social protection measures; and PHP100-billion financing for extra-budgetary infrastructure projects and fund for large infrastructure projects.
Also part of the fiscal measures then were the PHP30-billion fund for new and temporary additional benefits for members of the Social Security System (SSS), Government Service Insurance System (GSIS), and the Philippine Health Insurance Corporation (Philhealth), PHP40 billion in income tax cuts, and PHP250 million as “payback” package for overseas Filipino workers (OFWs).
Monetary and macro-financial policies implemented that time also included the Bangko Sentral ng Pilipinas’ (BSP) decision to accommodate first-round effects and to keep policy rates steady in the early part of 2008, hike in BSP’s key rates from June to August of 2008, the introduction of a US dollar repurchase agreement (repo) facility, cut in bank’s reserve requirement ratio (RRR), hike of the rediscounting budget, and a policy rate cut in December 2008 as inflation outlook got better.
This time, BSP’s policy-making Monetary Board (MB) has slashed key policy rates by a total of 75 basis points, approved the purchase of PHP300 billion worth of government securities to be redeemed within six months, cut universal and commercial banks’ (U/KBs) RRR by 200 basis points to help boost domestic liquidity, and the advanced remittance of PHP20 billion worth of dividends to the national government to support funds for Covid-19 measures.
The report said domestic growth before GFC was 6.6 percent in 2017, but it slowed to 4.2 percent the following year and to 1.1 percent in 2009 before rebounding to 7.6 percent in 2010.
It said there is now a big difference between the domestic economy this time and a decade ago, citing the larger share of not just the trade sector but also the tourism sector.
Consumption and remittance inflows remain among the growth drivers of the economy, the report said.
“An estimated deeper impact of the Covid-19 pandemic on the bigger real macroeconomy, compared to the economic losses caused by the GFC, warrants wider and more encompassing policies. By mere optics, the current crop of policies may have to be augmented further and a more targeted policy support is very much needed,” it added. (PNA)
