Breaking the vicious circle of shrinking demand and supply in the domestic economy under the grip of the global coronavirus crisis can be done by accelerating the Duterte administration’s “Build, Build, Build” infrastructure program, which will create jobs, and, in turn, stimulate growth and boost domestic consumption, Finance Secretary Carlos Dominguez III has said.
Dominguez said at a recent press briefing that restarting “Build, Build, Build” projects, especially those located in rural areas, will be the best way to revive the economy because of infrastructure spending’s high multiplier effect of raising incomes, stimulating demand and generating new jobs and businesses.
The “Build, Build, Build” program will not only rev up the economy, but will also fix the country’s weak infrastructure and logistics network, which has driven up production and operational costs for investors, Dominguez said.
“The main problem of our economy now, as (Acting Socioeconomic Planning Secretary) Karl (Kendrik Chua) mentioned earlier, is liquidity because people have not worked. They have no cash and are therefore, illiquid. And when you have no cash, you don’t buy things. And when you don’t buy things, people don’t manufacture these things. So it’s a vicious circle,” Dominguez said during a recent virtual press briefing.
“So the way you break it is you create employment so that people can receive cash, so that they will be confident to be able to start purchasing things again. And when they do that, the companies, the manufacturers, will also start up and provide jobs,” he added.
With most areas including Metro Manila, under general community quarantine (GCQ), essential and priority public and private construction projects are now allowed but with strict compliance to health and safety protocols.
According to Dominguez, the Duterte administration is banking on an array of recovery measures and the fundamental reforms it has put in place to keep the economy resilient, to put the country back on its positive growth trajectory and let Filipinos get back to work as safely and as soon as possible under a post-quarantine environment.
He expressed confidence that the Philippines can bounce back from the unprecedented health crisis spawned by COVID-19, given President Duterte’s prudent approach to fiscal management, which has placed the country in a strong position to weather the impact of the pandemic that has battered the global economy.
The President’s conservative economic policies have also provided the government with the fiscal space it needs to fund cash-intensive programs that will help the economy and the people hurdle the current crisis, Dominguez added.
He said President’s Duterte’s prudent fiscal management is reflected in the Philippines’ sovereign credit rating of “BBB+,” which is the highest in the country’s history; strong gross international reserves; low inflation and stable prices; and improved revenue flows from the comprehensive tax reform program (CTRP).
“This ‘saving-for-a-rainy-day’ approach to economic management has gained for us the trust and confidence of the world’s most respected credit rating agencies and development partners, such as the Asian Development Bank (ADB), the World Bank, Asian Infrastructure Investment Bank (AIIB), allowing us to borrow money at lower interest rates and longer repayment periods,” Dominguez has said.
Aside from restarting “Build, Build, Build” to revive the economy while protecting the health and well-being of Filipinos, Dominguez has also recommended to the President the implementation of the following priority measures: (1) the hiring of contact tracers to boost our efforts to slow down viral transmission; (2) attracting foreign investors by passing the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which will be redesigned to include flexible tax and non-tax incentives so the Philippines can better target the investors the economy needs; (3) promoting the manufacturing of products that have strong, inelastic demand, such as food production and logistics, to stimulate demand; and (4) supporting their whole value chains, from inputs to packaging and logistics.
Dominguez said the President’s quick and decisive action to impose strict lockdowns in March following the local community transmission of the highly contagious COVID-19 helped the government meet President Duterte’s priority goal of saving lives and protecting communities in the face of the contagion.
The Congress also moved quickly by passing Republic Act (RA) 11469 or the Bayanihan to Heal As One Act, which grants the President expanded but limited budgetary powers to effectively carry out the government’s COVID-19 response, he noted.
This, in turn, enabled the government to pursue its four-pillar strategy to defeat the pandemic that has a combined value of P1.74 billion or 9.1 percent of the country’s GDP.
The four-pillar strategy covers the following: (1) providing poor and low-income households, small-business employees and other vulnerable groups emergency and wage subsidies (P595.6 billion); (2) marshalling the country’s medical resources and ensuring the safety of healthcare front-liners (P58.6 billion); (3) fiscal and monetary actions to finance emergency initiatives and keep the economy afloat (P1.1 trillion), and (4) an economic recovery plan to create jobs and sustain growth under a post-quarantine scenario, which will be funded largely by pillar No. 3.