CEBU CITY – The Bayanihan to Heal as One Act 2 was approved by the Bicameral Conference Committee last Thursday and awaits final ratification before being transmitted to the President for his signature. It allocates P140 billion for various government initiatives to combat the Covid-19 pandemic. There is an additional P25.5 billion as a standby fund if money is found to fund additional spending. Bayanihan 2 replaces the expired Bayanihan 1 which itself had an appropriation of P390 billion. So the total budgetary outlays for B1 + B2 would be about P555.5 billion when all is said and done.
It is a lot of money. But is it enough? The Philippine economy in 2019 was P19.4 trillion. If you’ve been paying attention, the government reported a 16.5% decline in the Philippine economy in the second quarter of this year. This follows a small decline in the first quarter of this year. Over-all, our economy has lost about P850 billion in value this year compared to last year.
P850,000,000,000. That’s about 57 PhilHealth scandals right there. Having said that and without boring you with the details, I would estimate that our economy has probably suffered over a TRILLION pesos directly attributable to the pandemic with more likely to come. In percentage terms, we have to go all the way back to the tail end of the Marcos years to see numbers like this.
The pandemic and the crisis of the magnitude that it has brought was always going to have significant economic consequences. No one can blame anyone for this. What does matter is how we, and our government in particular, react with measures and actions to mitigate the terrible effects of this pandemic. I have written at length about my view of the public health response of this government in previous posts. As with my view on that side of the equation, the economic response similarly leaves a lot to be desired.
Foundational economics tell us that any economy is driven by spending from consumers, private investment, government spending and our balance of trade (exports, imports). Consumers (us) account for about 70% of spending in our economy. Then there is private investment and then government spending in that order. It does not take a genius to know that both consumer spending (down 15.5%) and private investments (down 53.5%) have just about collapsed. Foundational economics also tells us that during these times of economic upheaval, the government steps in and tries to spend more to keep economies from totally collapsing. This was a hard lesson learned. When government failed to do precisely this, the United States had its Great Depression in the 1930s.
Our government is trying to do just that. The question is, is it doing enough? In any circumstance, it is quite difficult to gauge how much is enough. When your economy has lost about a TRILLION pesos in value, how much spending should the government do to prop the economy up and salvage enough of it so people don’t starve and recovery, while not easy, does not have to be that difficult?
There are, however, ways to compare our response relative to other countries. Another unique impact of this pandemic is that almost all of the countries in the world are pretty much in a similar economic boat as we are. Thus, in a sense, there is some way to compare our response to theirs.
The P555.5 billion that has been appropriated for our response translates to about 2.7% of our GDP (the size of our economy). Compare this to Indonesia (7%), Thailand (9.6%) and Japan (21.1%). Doing this gives us a sense that we may not be doing enough. The Department of Finance has basically dictated what we can spend saying that we can’t risk damaging our credit ratings. Credit ratings? Who cares about that right now? Every country in the world will have their credit ratings damaged by this pandemic. And it’s not like we don’t have the capacity borrow. By all measures, our country over the years has built up a fairly credible standing with the global financial community. Why can’t we use that now? Is there anything worse that we are expecting that we have to protect these credit ratings at all costs?
I can go on and on but it is difficult to look at things and not be dejected by the actions, or the lack thereof, of this Administration in response to this pandemic. To be fair, there have been exceptions but it is almost impossible to objectively look at the totality of the response, both from the public health and the economic perspective, and conclude that we have done the right things and are headed in the right direction.
In many ways, the lack of competence, the seeming absence of empathy and the corruption have always been there. This pandemic has just shined an even brighter and harsher light on not just this Administration but on the pathetic state of politics, the clueless government bureaucracy and the broken society that we have allowed ourselves to become.
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