Discordance amid a falling economy
The global economy is projected to contract by 3% in 2020, according to a report by Global Finance. Economists note that recession brought about by the pandemic is the worst recession since the 1930s and surpassing that of the 2008 global financial crisis. Emerging market and developing economies are expected to decrease slightly, yet more people living close to the poverty line will suffer the greatest consequences in terms of extreme poverty. (gfmag.com)
Hoping that the economic downturn can be reversed or at least be mitigated, the House of Representatives passed House Bill No. 6815 or the ARISE Philippines Act. ARISE means Accelerated Recovery and Investments Stimulus for the Economy. The P1.3 trillion or $19.823) economic stimulus package seeks to offer various forms of assistance to micro, small, and medium enterprises (MSMEs) and other key sectors affected by the COVID-19 crisis, while at the same time rebuilding consumer confidence. It is expected to generate some 1.5 million jobs through infrastructure projects and financial assistance for small businesses between 2020 to 2023. The P1.3 trillion would be used to fund wage subsidies and cash-for-work programs for displaced workers, zero-interest loans for companies, and loan guarantees for banks. (rappler.com)
Although the proposed package is supported by the business groups, progressive members of Congress branded the proposal as a band-aid solution to the crisis. Compared to the stimulus package of other ASEAN countries, ours pales in comparison to Thailand’s $84.092 billion in economic stimulus package; Indonesia with $64.274 billion; Singapore, $45.062 billion; Malaysia, $35.474 billion; and Vietnam with $26.396 billion. India has a staggering economic stimulus package of $345.600 billion.The economic stimulus packages of the top five countries would boost their gross domestic product by 15-12 percent and empower their citizenry with $7,991 to $276 per capita income.In the case of the Philippines, the planned $19.823-billion fund would only contribute 5.39 percent of GDP and $185.86 per capita income. (Cahiles-Magkilat, Bernie [June 4, 2020]. Manila Bulletin. Retrieved from https://bit.ly/2OCZack)
Despite the decent amount of the stimulus package proposed by the House, the economic managers of the Duterte administration said that the government cannot afford such an amount. NEDA Chief Karl Chua instead proposed a P130-billion stimulus package and the passage of the Corporate Income Tax and Incentives Rationalization Act which will lower the corporate income tax to 25% and will rationalize fiscal incentives. This will allow corporations to have free funds that can be used to invest business ventures that will create jobs and provide income to households affected by the pandemic. According to Chua, the proposed ARISE Act cannot be funded by revenue sources and will push the budget deficit beyond 9% of the Gross Domestic Product (GDP) which is considered an affordable threshold.
With the reduction of the stimulus package to P130-billion, the Philippines will be among the countries with the smallest budget for economic recovery. In a race towards economic recovery in this uncertain time, what else can we expect as a result? It is better for Congress and the economic managers to iron out their misgivings. Now that we are in economic recession, the road to recovery for the Philippines may turn out to be very slow, fatal to many businesses, and excruciating to the poor when the ‘blood transfusion’ is delayed by long and debilitating debates on what direction we are going.