This is article was originally published with the title, “Will GDP growth be a priority this year?” at Daily Guardian.
It just took a little virus to cause the world to shift beyond proportions. The COVID-19 pandemic is worse than wildfires and this will surely be felt in the coming years even if we all survive.
In the Philippines, the standstill in business activities already pushed the government to shell out every peso it has while negotiating with international financial institutions like the Asian Development Bank and the World Bank for extra cash.
In fact, the recently issued National Budget Circular No. 580 by the Department of Budget and Management has already testified that “given the duration and scale of the pandemic, adequate and readily available funds must be provided in a sustainable and responsible manner”. It mandated the discontinuance of 10 percent of FY 2020 maintenance and other operating expenses as well as capital outlays. Overall, the circular likewise prescribes that 35 percent of the programmed appropriations shall no longer be made available for release as of April 1, 2020. All these were done in line with the full implementation of Republic Act No. 11469 or the Bayanihan to Heal As One Act.
Taking a look at the FY 2020 general appropriations, the biggest chunk of the 4.1 trillion-peso budget goes to education with P654.77 billion, followed by public works and highways with P580.89 billion, and interior and local government with P239.64 billion. The government committed to invest P172.37 billion in its health services (including that of the government-run health insurance).
With these circumstances and the scale of the damage of this invisible virus, we can only imagine that even if we survive, the worse is yet to come particularly in our economic priorities.
The gross domestic product measures the total value of goods and services in a country. According to CNBC, it is composed of total consumption, investment, government spending and net exports; and further simplifies it as the overall health of an economy.
Consumption is another way of calling consumer spending on goods and services. Given the past two months of fewer consumer spending coupled with those who temporarily (hopefully not permanently) lost their jobs, it is pretty safe to conclude that this will not offer a good bunch of our economic revival. It may improve soon when lockdowns are lifted and businesses slowly enter the new normal.
Investment is how much businesses spend on buildings, land, and equipment. All businesses felt this standstill even if they continue to operate grocery stores, pharmacies, and the like. However, if we talk about bigger scales like malls, a news item of ABS-CBN reported that retail and restaurant operators suffer a drop of 30 to 50 percent in the total retail environment which generates P20 billion in sales daily. With daily loses, how much would be left for the business sector to invest?
Meanwhile, government spending is the amount of money spent by the government for the goods and services they provide. This is probably what is left as the last resort of the government to make the economy seem look healthy, financially. Just imagine setting aside billions of pesos for the social amelioration program hastily released by the pressure-cooked social welfare department as well as the COVID-19 adjustment measures program undertaken by the labor department. The government is spending so much money right now that the second quarter has just started and yet we are already trying to identify coping mechanisms to project a strong and manageable fiscal planning.
Lastly, net exports are exports minus imports, or goods coming out minus goods coming in. In a report of the Philippine Statistics Authority as of May 2019, exports have increased by 1.0 percent while imports have decreased by 5.4 percent. These look promising until we come to the actual figures where imports are still more than exports. What net exports do we have left? With that to mention, a good economic standing is far from reality if we rely on net exports.
The GDP alone is not entirely what attracts a healthy economy. It is more illustrated in the GDP growth rate and by definition, its shrinkage for a period of two consecutive quarters is considered by most economics experts as a recession. At the current situation, we cannot entirely tell just yet. But after the lockdowns when everything meets the new normal, high unemployment, falling average incomes, increased inequality, and higher government borrowing (such as loans to which they have done so far) will characterize and somehow confirm that we are in a recession.
Nevertheless, it may be high time that the government should reconsider its priorities as we are losing and owing more money than we earn. Much more, the best they could do after this pandemic would be to ensure that future pandemics would be managed not just by mere provision of protective equipment to health workers and distribution of free cash but by concrete, systematized, and comprehensive measures. It is much understandable if we somehow failed to stay afloat with ease right now since the Philippines never experienced such catastrophe of this worldwide scale.
The government should revisit big chunks of infrastructure projects in the Build, Build, Build program. The projects are mostly promising but some will also be sourced from loans that will add up to the money we owe. Agriculture should also be revisited to make sure we are self-sufficient and would not resort to imported basic commodities like rice. The government should also look into having more financially stable citizens by conducting programs promoting financial literacy as well as standardizing the minimum wage making it universal to foster growth not just in Metro Manila but all provinces. If they get lucky in implementing this, we might see less congested roads there making unnecessary public infrastructure as additional savings in government expenditures.
We do hope that our leaders would consider our country improving internally through its people than just mere figures that do not add up to the satisfaction of all of its citizens. This pandemic is teaching us a lot.