What will it take for the economy to recover?

Part 2 (Conclusion)

Beyond monetary policy

The second panel member, former BSP deputy governor Diwa Guinigundo agreed that at the beginning of the pandemic, the country was in a position of strength, with strong macroeconomic fundamentals, and an efficient economy. He characterized the country’s journey towards economic recovery like a vehicle travelling through a road faced by headwinds and roadblocks which we need to hurdle, and unless we run smarter, we may run out of gas. What were such challenges? We are faced with a weak public health management system, which lacks readiness to respond to COVID-19. The health sector is given low priority as evidenced by its small budget allocation, the health plan is unclear, and there are issues in governance and incidences of corruption.

From his point of view, the monetary policies adopted by the BSP are responsive to the crisis, and it has done enough within its scope. The BSP’s efforts of shoring up foreign reserves and improving the country’s external debt profile in previous years, plus responding with lowered interest rates and lending to the national government has cushioned the impact of the pandemic.

Given the good long-term prospects of the economy as shown by relatively good debt spreads indicating market confidence, he believes that the health sector needs to “shape up” and flatten the epidemiological curve. Fiscal policy must be strengthened to reduce reliance on borrowings by raising public revenues, though that would be harder to come by. Further, the budget should be realigned in favor of health, education, and public works.

Guinigundo concluded that the chance of reaching the end of the tunnel is fragile, and the authorities must avoid further missteps in governance and unnecessary battles to restore public confidence.

Recovering from the triple shock

In the words of former NEDA Secretary Romulo Neri, the third panel member, what the country has experienced was a “triple shock”, with demand collapsing, labor supply curtailed, and financial markets collapsing. How does the country recover then from such shock? The government needs to be redesigned to support household consumption through income transfers, remobilize the unemployed, regenerate natural resources and enhance agriculture to ensure adequate food supply to strengthen the people’s capacity to cope with the crisis. On the other hand, the private sector must provide support to agriculture through inclusive business practices by engaging with small farmers, processed food manufacturers increasing value-add through technology, design, and packaging, as well as featuring processed agricultural products at the retail level.

More funds should be infused in the rural areas for development and manpower remobilized. Countryside LGUs could activate agricultural extension programs with the Department of Agriculture, and mobilize military personnel for reforestation, mangrove restoration, and upland development. Productive agricultural regions could facilitate migration from the cities and urban poor can find livelihood in the countryside.

He further emphasized the need for paradigm shifts from “unbridled consumerism” to environmentally nurturing economics – shifting capital to restore natural resources and facilitate public spending for common entitlements, remobilizing manpower from low-income urban services and disenfranchised citizens to replant forests and mangroves, decongesting polluted urban areas and developing greener spaces.

As his final comment, Neri, quoted from a McKinsey article that called upon CEOs and business leaders to take the lead in the economic recovery efforts, as “the pandemic could give rise to a new era of human development. Otherwise, economic and social development may falter for decades.”

The road to economic recovery

With all four resource speakers agreeing that there indeed is light at the end of the tunnel, the challenge is to get the country back on track and on the road to economic recovery. How do we realize the vision underlying the legislative measures that have been passed/proposed that aim to address the economic downturn, to ensure that the implementation of these laws will address the needs of the ordinary Filipino, and proactively manage the effects of the pandemic, so that the country can restore inclusive growth?

For answers to this and more, we invite you to join us for the third edition of the SharePHIL Online Summit Series on Oct. 21, Wednesday at 2 p.m. featuring Sen. Ralph Recto as keynote speaker, followed by a panel discussion with former NEDA Secretary Ernesto Pernia, former Health Secretary Dr. Manuel Dayrit, and Ms. Cherie Atilano CEO of AGREA and ambassador of food security of the Department of Agriculture.

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From Vision to Reality: The Road to Economic Recovery will be streamed live on SharePHIL’s Facebook page at fb.com/SharePHIL and YouTube channel at bit.ly/SharePHILonYT. To get email updates, sign up at sharephil.org/events.

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About the author:

Ma. Aurora “Boots” Geotina-Garcia is vice president of SharePHIL and treasurer of the Institute of Corporate Directors. She is also chairperson of the Philippine Women’s Economic Network (Philwen) and co-chair of the Philippine Business Coalition for Women Empowerment (PBCWE). She is president of Mageo Consulting Inc., a company providing corporate finance advisory services.