Stress test

Stress test"The government’s policies, properly implemented, will get us back on track."


Today, July 1, marks the beginning of our fourth month in quarantine and ushers in the second semester of 2020. To describe this period as a challenge for our country and our people would be an understatement. Given the unprecedented impact of this invisible enemy not only on our lives but to millions of people worldwide, it has been a struggle like no other. But we have not seen the end of all that exertion. Far from it. In fact, if we go by the record, we probably just got off the starting line. 

Like all others, our first and, of course, continuing response to the pandemic is to save lives. We imposed the most restrictive lockdown, the Enhanced Community Quarantine (ECQ), asked everybody to stay at home and ensured that everything else except essential services and personnel would be allowed to take to the streets. Nobody moved. Period. Government had to scramble to get hold of available resources to put in place a medical and social net to cover the needs of the most vulnerable sectors which make up the majority of the population even as it enjoined the private sector to keep-workers-on-the-job and enhance their support to frontliners and the poorest-of-the-poor.

These undertakings they were obliged to do even as they themselves had to bear the costs of idled operations. To Save Lives. But, as is now getting obvious, any extended lockdown without easing up to let the economy breath is a formula for a double whammy. Saving Lives comes with Saving Livelihoods. Under the circumstances, saving one without the other is not only unsustainable. It is unworkable. The economy has to breathe, people have to move and goods have to be traded to ensure that services including health care are put in place. The country cannot be indefinitely locked down. Therein lies our stress test: How to calibrate the easing up to ensure that we really Save Lives while Saving Livelihoods.

Last January, buoyed by the country's economic performance in 2019 which put us squarely within the top tier of the best performing economies in Asia if not globally, we were looking at another year of top notch growth. We were the darling, so to speak, of rating agencies and financial institutions almost all of whom were in agreement that indeed 2020 will be a banner year for the Philippines. Then, COVID- 19 set in. The global economy literally got locked down and almost all countries went into a tailspin. We entered uncharted territory, optimism turned into anxiety and gloom set in. We have to brace for the global fall out. Our economic stress test is now underway with hardly any room for error given our make up as a heavily consumption based economy. 

For years, household consumption has accounted for more than half of the country's gross domestic product (GDP), the balance by a modicum of manufacturing, construction, tourism and related services and investments. With sustained growth in OFW remittance and BPO set ups (POGOs, by the way, are actually BPO operations), consumption's GDP share went up even more. Last year, it was estimated to have climbed up to 70 percent (whew!!) of the country's gross domestic product. 

That dependency while not ideal was deemed permissible at that time given the buoyancy of the global economy which, from all indications, was possibly going to last at least for another five or even 10 years.  The US-China trade war was semi-aborted with the inking of the first covenant on the exchange of goods and services. The price of oil, a major factor in global trade, was at an all-time low, easing up only gradually. Travel and tourism were at an all-time high. Manufacturing in most industrialized countries was inching up. No less than the World Bank and the IMF were projecting global growth to inch up to 4 maybe even 5 percent—a record.

But COVID-19 has altogether wiped out those rosy expectations. Last we looked, both institutions are now hoping the global economy will not plunge into recession worst than during the Great Depression. Even the mightiest countries, from the G-7 to the BRICS (Brazil, Russia, India, China and South Africa) grouping to the newly industrialized ones have given up on their own prospects for recovery.   

Under the circumstances, we are really in for a stress test like no other. 

We were able to withstand the effects of the worst financial crisis in recent memory the latest being the Wall Street crash which broke the backs of the biggest US and European banks. It's iffy this time around.

We just registered the highest unemployment rate in recent memory—17.7 percent of the workforce was out of job immediately after the onset of COVID-19. Our OFWs who remit more than US$35 billion annually are coming home, swelling the ranks of the unemployed. Travel and tourism are down to almost zero. Our two biggest airlines are cutting back and definitely saddled with debt. Many retail and service establishments are closing down. Trade and manufacturing are barely moving. The most immediate economic booster—construction—is yet to get on track. The MSMEs which make up most of the employing sector have yet to get back on track. Simply put, government must make the necessary moves to get the country out of its COVID-19 imposed slumber.

Well, the good thing about it is government has gotten almost all of the allocated P259-billion Bayanihan-To-Heal-As-One funds back into the economy. Hopefully, that money will now circulate in a manner that can ignite some fire in the targeted sectors. The Bangko Sentral has tweaked monetary policy to neutralize the pandemic impact. Government is scouting for means to fund the stimulus package and other interventions to get things going. All of these, properly implemented, will get us back on track.

I hope our struggle for economic recovery will materialize soon enough. We heard we would surely have a break by the second semester of 2021. Sana na nga.

Topics: Enhanced Community Quarantine , COVID-19 , economic recovery
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