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Saturday, May 8, 2021

PH ‘stimulus’ smallest in region

spending in response to the COVID-19 pandemic is among the smallest in the
region, said research group IBON. The narrow-minded obsession with
‘creditworthiness’ stops the government from taking the urgent
steps needed to restore livelihoods and save the economy. The group said that having
economic managers dominated by finance people rather than development experts
is the biggest obstacle to real recovery.

According to the International Monetary Fund (IMF) Policy
Responses to COVID-19 tracker, the fiscal policy response of the Philippines is equivalent to
just 3.1% of its gross domestic product (GDP). IBON noted that this is the
smallest among the major economies of Southeast Asia. This is less than in
Singapore (19.7%), Vietnam (13.3%), Thailand (9.6%), Indonesia (4.4%) and
Malaysia (4.3%). It is also less than half of the global average of around 6.2%
of GDP.

The Philippines’ ranking does not change even if the Bayanihan
2 bill recently approved by the Senate is passed into law, said the group. The
proposed Php140 billion stimulus program is worth just 0.7% of the GDP and will
bring the country’s fiscal response only to 3.8% of GDP. The IMF notes that
country data are not always strictly comparable but the figures are nonetheless

IBON said that upcoming national government (NG) budgets meanwhile
see the smallest post-crisis ‘stimulus’ increases in decades, further
undermining economic recovery. Department of Budget and Management National
Budget Memorandum No. 136 only foresees a 5.7% budget increase in 2021 falling
to an even smaller 1.8% increase in 2022, despite the country facing the worst
economic decline in its history in 2020 because of the pandemic. The budget
increase in 2021 would be the smallest in a decade and in 2022 the smallest in
over 30 years.

These increases also compare unfavorably with budget increases
after the 1997 Asian financial crisis and 2008 global financial and economic
crisis. After the Thai Baht collapsed in 1997, the NG budget rose by 9.3% in
1998 and then by 8.0% in 1999. After the Lehman Brothers firm collapsed in
2008, the NG budget rose by 9.1% in 2009 and by 2.7% in 2010.

The economic managers have been blocking larger stimulus packages
proposed by Congress since at least May, the group said. The House of
Representatives and Senate took up more meaningful stimulus measures worth at
least Php1.3 trillion or more but stopped when the finance department told them
to because these were ‘unfundable’ and ‘unsustainable’. These
measures would have been closer to the global average.

Among others, this also affirms that the so-called power of the
purse of Congress is illusory and how the president and executive branch are
actually in complete control of the country’s finances. The
president can implement a bigger stimulus package if he wants to.

The obsession of the economic managers with ‘creditworthiness’ is
misplaced, said IBON. Thailand, Vietnam and Indonesia have lower credit ratings
than the Philippines but are spending more to respond to and recover from the
pandemic. Financing can be raised by reallocating from less productive
infrastructure and debt service, and by a more progressive tax system with
higher taxes on large firms and the wealth of the country’s super-rich.

The magnitude of the country’s response has to be commensurate to the crisis at hand. This should span health measures, continued cash subsidies to improve household welfare and boost aggregate demand, and support especially to Filipino and domestic market-oriented micro, small and medium enterprises, said the group.

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