Finance Secretary Carlos Dominguez III has underscored the need to strike a “reasonable balance between safeguarding public health and restarting the economy” as the country continues to grapple with the coronavirus pandemic and work on a quick economic recovery on the back of a healthcare system better equipped to keep community transmission of the contagion under control.
The head of the government’s economic team said that while the people’s health and safety remain the government’s top priority, Filipinos cannot keep retreating from the virus at the cost of their livelihoods, especially in Metro Manila and the Cavite-Laguna Batangas-Rizal-Quezon (Calabarzon) region that collectively account for 67 percent of the domestic economy.
“It is vital that these regions reopen. The reality is that this virus will not go away until a vaccine is found. In the meantime, we must get back to work while staying safe,” Dominguez said during the pre-State of the Nation Address (SONA) forum of the Cabinet’s Economic Development and Infrastructure Clusters (EDIC) held this morning.
Dominguez stressed that the government will never take the threat posed by the coronavirus disease 2019 (COVID-19) pandemic lightly, as it must continue protecting lives in ways that do not prevent people from earning a living.
“This is a tough decision to make but we need to do this. Revving up the economy essentially means raising consumer and investor confidence, which requires some functional level of interaction among groups and individuals,” he said. “We are asking all Filipinos to cultivate in themselves a renewed sense of confidence through continued vigilance–not out of fear, but with the knowledge that most factors of viral transmission are under our personal control.”
Dominguez said the government remains fully committed to implementing the “Build, Build, Build” infrastructure program with more projects focused in the areas of health, education, housing, and water and sanitation.
It is likewise pursuing bold fiscal and economic reform measures, such as the remaining packages of the Comprehensive Tax Reform Program (CTRP), and the amendments to the Foreign Investments Act, the Retail Trade Liberalization Act, and the Public Service Act.
“Be assured that the Duterte administration will protect our economic gains, support our recovery, strengthen our resilience, and bring us back to the path of inclusive and shared prosperity. This crisis will not diminish our willingness to exercise decisive leadership,” Dominguez said.
“By working together, we will beat this pandemic and come out even stronger than ever,” he added.
He noted that President Duterte’s early and decisive actions to combat COVID-19 slowed down the spread of the virus instead of allowing it to grow exponentially faster and gave the government time to expand its testing capacity from just around 300 actual tests per day in March to 18,141 average daily tests at the start of this month.
As an indicator for whether a country is doing enough tests, the World Health Organization (WHO) has set a 10-percent positive rate as the benchmark. The Philippines meets this measure, with only 7.4 percent of tests yielding a positive result, Dominguez noted.
More importantly, the Epidemiological Models by the FASSSTER Project in April and the University of the Philippines (UP) COVID-19 Pandemic Response Team as of June 27 have shown that government interventions such as the community quarantines have prevented as much as 1.3 to 3.5 million infections.
The government was also able to protect the country’s medical frontliners and healthcare workers better, by procuring 1 million personal protective equipment (PPE) sets by end of April, to 6 million by end of June—a sixfold increase that was accelerated by the special powers under the Bayanihan to Heal As One Act that facilitated emergency procurement, and measures by the Bureau of Customs (BOC) to expedite their release from the ports, Dominguez noted.
As a result, from 20 percent at the end of April, healthcare workers now comprise less than 8 percent of confirmed COVID-19 cases as of July 5.
Also, from around 33,000 beds in quarantine facilities in mid-April, the government was able to bring isolation and treatment capacity as of July 6 to 68,000 beds, of which 75 percent are still vacant and available for use to date.
Only less than 1 percent of all COVID-19 cases in the country are severe or critical, while the rest are mild or asymptomatic cases, and will not need intensive hospital care. “Despite this, we will sustain our efforts to expand access to testing, hire more contact tracers, and beef up our treatment capacity,” Dominguez said.
All these measures to save and protect lives required massive amounts of funding which the government augmented through borrowings, given that revenue collections were down because of the economic standstill following the government's imposition in March of strict mobility restrictions in a bid to contain COVID-19 spread.
The funds that the government has raised so far to fight COVID-19:
To date, the Department of Finance (DOF) has raised a total of US$5.3 billion in concessional budgetary support from the Philippines’ development partners to help cover the yawning deficit resulting from the need to spend big on measures to provide relief to pandemic-affected sectors, beef up the country’s healthcare capacity, and keep the economy afloat, Dominguez said.
The Philippines also secured a total of US$126 million in grants and loans from its development partners for various Covid-19 specific projects, which include the purchase of emergency medical supplies and equipment, and a food distribution program for the poorest households in Metro Manila.
It has also received a total of P149 billion in remittances from government-owned and -controlled corporations (GOCCs) since the start of the year.
In the commercial market, the government raised US$2.35 billion from its latest global bond offering that fetched the Philippines’ lowest ever coupon in the US dollar market, while domestic sources accounted for P1.2 trillion in gross domestic borrowings from the beginning of the year to support the national budget.
As part of this, the Bangko Sentral ng Pilipinas (BSP) entered into a repurchase agreement with the national government amounting to P300 billion to help fund COVID-19 initiatives.
“All these are a clear vote of confidence in our future recovery and a favorable appraisal of where our prospects stand compared to the rest of the world,” Dominguez said in pointing out that the government was able to secure these borrowings at lower interest rates and longer repayment periods because of the country’s sterling credit-worthiness.
“The ability to refinance at lower cost will help us bounce back more quickly and more sustainably. This is what makes the credit ratings so crucial to restoring our economy’s health,” Dominguez said.
From these funds, the Department of Budget and Management (DBM) has thus far released allotments totaling P375 billion for the government’s COVID-19 response programs, Dominguez said.
Dominguez said the government has started rolling out some components of an effective recovery program, which, he made clear, should be a plan the country can afford and fully execute.
With all these initiatives being put in place to enable the country to bounce back quickly from the pandemic, Dominguez said Filipinos must do their part as individuals by adhering to minimum health standards such as the use of face masks, frequent washing of hands and social or physical distancing both in our homes and places of work.
“We have thrown a wide safety net for our people and our economy. This government will support you as you protect yourselves, your families, your colleagues, and your workers from this invisible menace,” Dominguez said.
What the government has done so far:
Dominguez enumerated some of the key measures that the government has implemented so far to help Filipinos cope with the economic downturn spawned by the pandemic:
· A P205-billion emergency cash or Social Amelioration Program (SAP) for 18 million poor and low-income families in the informal sector and a P51-billion Small Business Wage Subsidy (SBWS) program for employees of small businesses designed as immediate relief measures;
· The Social Security System (SSS) has extended calamity assistance loans for COVID-19. Since its online filing was launched on June 15, the SSS has approved a total of 479,000 applications amounting to P7.5 billion. To date, it has released P1.7 billion to 102,500 member-borrowers;
· The SSS has also extended to eligible members unemployment insurance benefits (UIB) equivalent to half of their average monthly salary credit for two months. Since the start of the lockdown, it has already approved 6,300 applications totaling P84.4 million. Since the UIB was launched in August 2019 up to this date, the SSS has released P 76.2 million worth of benefits to 5,740 applicants;
· The Government Service Insurance System (GSIS) has introduced a new P30,000 computer loan program to its active members to help each of them purchase a laptop or desktop in light of the new normal way of holding distance or online classes. The loan will be payable in three years at a 6 percent interest rate per annum;
· In addition, the GSIS will launch in September an educational loan program for its members to help them pay the tuition and other school fees of their nominated student-beneficiaries. The maximum loan amount that can be taken out by a borrower for a given academic school year is P100,000. This will be payable after five years from the initial loan take out;
· The Land Bank of the Philippines (LANDBANK)’s “study now, pay later” initiative under its Access to Academic Development to Empower the Masses towards Endless Opportunities (ACADEME) program has so far approved loan applications from schools totaling P260 million since it was launched last May, with over 80 private educational institutions nationwide expressing interest in accessing this credit facility;
· The Philippine Guarantee Corp. (PhilGuarantee) has launched a credit guarantee program covering a total of P120 billion worth of loans for private banks for them to be able to extend financial assistance to small business owners during this crisis. To date, the corporation has already accredited 22 banks for a total facility of P37.5 billion. Businesses are expected to start availing of the program by the end of July, once banks complete their legal review of the guarantee agreements;
· The Department of Labor and Employment (DOLE) has extended financial aid totaling P6.48 billion to over 1.18 million displaced employees in both formal and informal sectors of the economy, including returning overseas Filipino workers;
· The Technical Education and Skills Development Authority (TESDA) has launched an online training program for displaced workers to upskill them. Since the start of the lockdown, 722,000 individuals have already availed of this program, with the government extending assistance in providing job opportunities for them so that they could eventually be absorbed by the economy in the shortest possible time;
· The Department of Tourism (DOT) has been implementing Online Learning Series workshops since April as part of its retooling program for industry stakeholders. To date, 23 webinars have been conducted for about 7,200 participants. The agency is also working on its Tourism Response and Recovery (TRR) program focused on the protection of tourism workers, promotion of domestic destinations, and development of institutional measures in support of the new normal, among others;
· The Department of Agriculture (DA) has rolled out cash subsidies for over one million affected farmers and fisherfolk amounting to P6 billion, or P5,000 each. Farmers and micro and small agricultural enterprises can also tap the Survival and Recovery Aid (SURE) program of the Agricultural Credit Policy Council (ACPC) for additional financial assistance;
· Micro and small enterprises have availed of the P1 billion-peso COVID-19 Assistance to Restart Enterprises Loans (CARES) program of the Department of Trade and Industry (DTI) and the Small Business Corp. (SBC). The loan amount that businesses can avail of ranges from P10,000 to P500,000 at zero interest rate, payable in either 18 or 30 months. Since the program’s launch in April, the agencies have approved 2,000 applications with total loans amounting to P152.4 million. To date, a total of P14.2 million in loans has been released to 183 borrowers;
· The government has restarted and accelerated the "Build, Build, Build" program, subject to compliance with health and safety protocols;
· The Department of Science and Technology (DOST) is offering its Small Enterprise Technology Upgrading Program (SETUP), where businesses can access trainings to help them transition to online and contactless operation, while the Department of Information and Communications Technology (DICT) is providing online resources for businesses and workers under a work-from-home program. These programs will help businesses transition to the new normal; and
· To ensure that enterprises even in remote communities are able to adapt to the new normal, the Department of Energy (DOE) will be pursuing its total electrification program. This will be supported by the P2.46-billion Access to Sustainable Energy Program (ASEP) grant from the European Union (EU). The program aims to provide access to basic electricity and energy services to hundreds of thousands of households nationwide, with a focus on Mindanao.
What still needs to be done to support the economy and help people get back on their feet:
Dominguez said that for the economy to recover quickly in a sustainable and resilient manner, the Congress needs to act on four “legislative imperatives, which the economic team determined to be in sync with stakeholders’ recommendations. These are:
· Infusing additional capital to government financial institutions for them to be able to act as wholesale banks and fund substantial portions of loans that other commercial banks will provide to micro, small and medium enterprises (MSMEs) adversely affected by the pandemic. These private banks will then be able to lend even more money to businesses in need of liquidity;
· Allowing banks to dispose of non-performing loans and assets through asset management companies similar to the special purpose vehicles that were established in the early 2000s;
· Swiftly approving the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act that will reduce corporate income taxes (CIT) for the majority of small- and medium-sized businesses by 5 percentage points immediately. This will help enterprises retain employees, invest more money and meet their operating costs. The CREATE bill will also modernize the incentives system and allow the government to tailor-fit fiscal and non-fiscal incentives to the type of investors it wants to invest in the economy; and
· Providing greater support to the agriculture sector by giving the banking system the ability to support the whole value chain of agricultural enterprises.
The tradeoffs resulting from the government’s decisive actions to protect Filipinos from Covid-19:
Dominguez said the government’s decisive actions to save and protect lives came at a heavy price.
These tradeoffs include: a 0.2 percent contraction of the economy in the first quarter; a 17.7 percent unemployment rate in April; a 40.3 percent year-on-year decline in May in the volume of manufacturing, although improvements are now evident; a 16 percent drop in the collections of the Bureau of Internal Revenue (BIR) and BOC, but with the June 2020 figures improving; and an expected spike in the deficit-to-GDP (gross domestic product) ratio as the government spends more to fight COVID-19 and prepare for economic recovery.
The state of the economy before COVID-19:
Dominguez said that a strong economy sustained by President Duterte’s prudent approach to fiscal management helped the country meet the challenges of the pandemic.
“Without this global economic crisis, we had realized better economic outcomes for our people. Our economy was ready to soar,” Dominguez said.
Before this crisis plunged the world into a recession, the Philippines:
· Was among the fastest growing economies in Asia, with an average GDP growth of 6.6 percent from 2016 to 2019;
· Enjoyed a debt-to-GDP ratio at a historic low of 39.6 percent in 2019;
· Improved revenue collections to 16.1 percent of GDP, its best performance in 22 years as a result of the implementation of tax reform measures;
· Accelerated infrastructure spending to 5.4 percent of GDP in 2019, double the average for the past 50 years;
· Achieved the lowest recorded rates of unemployment at 4.5 percent, underemployment at 13 percent, and poverty incidence at 16.7 percent by the end of 2019;
· Kept its inflation rate stable and under control, averaging 3 percent from 2016 to 2019. For the month of June this year, the inflation rate further slowed to 2.5 percent. This means prices in June have only gone up by less than one quarter of one percent compared to the prices at the start of 2020; and
· Received a "BBB+" credit rating, the highest in the country’s history. Even amidst the pandemic, international credit rating agencies have affirmed the country’s sovereign ratings and have kept them at investment grade levels. The Japan Credit Rating Agency (JCR) upgraded the Philippines from "BBB+" to "A-" last month, which reflects a vote of confidence in a sea of credit-rating downgrades and negative outlook revisions worldwide.
Dominguez urged the public not to hesitate in using President Duterte’s 8-8-8-8 complaints hotline to air their grievances or make suggestions on how the government can better address the COVID-19 emergency.
“We are all in this together," Dominguez said. “We also ask you to bear in mind that while health measures are absolutely necessary for us to fight this pandemic, increasing economic activity in a responsible manner is a matter of national survival and priority.”
Dominguez encouraged the public to shift to digital means in conducting their transactions, and to help contribute to the government’s COVID-19 war chest by paying their taxes on time and, if they can, invest in government securities.
“As we enter 2021, we are going to plan for a healthier and more resilient Philippines, while making sure that all of the proposed policies are aligned with this new normal,” Dominguez said.