DESPITE the implementation of various gradations of community quarantine, we are not, currently, beating the virus. Our death toll is now over 3,000. We are worse off now than at any time since the pandemic first struck.
Economic policy has responded well to the challenges posed by COVID-19. The Bureau of the Treasury is providing macro-economic data which help define our economic policy.
The Treasury confirms that the government’s outstanding debt as at the end of 2019 was P7.73 trillion. At this time, the debt-to-gross domestic product (GDP) ratio was 39.6 percent. This means that the 2019 GDP was P7.73 trillion divided by 0.396 which is P19.52 trillion.
Sorry about the Math but it is unavoidable and, I believe, important.
The Treasury projects that the government’s outstanding debt as at the end of this year will have ballooned from P7.73 trillion last year to P10.16 trillion this year. Under normal circumstances, to allow the borrowing to rise so quickly would raise the question as to whether government is being profligate. Not so. In fact, the speedy response to the consequences of the pandemic prevented a catastrophic slide into poverty for much of the population.
The debt to GDP ratio for the end of this year is 53.9 percent. Hence the GDP for 2020 is P18.85 trillion compared to 2019’s P19.52 trillion. The contraction is inevitable under the circumstances.
There will be more government borrowing in 2021 and the indebtedness at the end of the year is estimated by the Treasury to be P12.0 trillion. The corresponding debt to GDP ratio is predicted to be 58.3 percent. This means an estimated GDP to be P20.58 trillion, which corresponds to an unrealistic growth rate of 9.2 percent over this year’s GDP of P18.85 trillion.
With the pandemic still gaining momentum, it is difficult to see how we can engender a 2021 growth rate of 9.2 percent.
***
What to do?
The implementation of the build, build, build (BBB) program with many ‘big-ticket’ infrastructure projects will clearly be helpful.
I believe that labor-intensive projects should have higher priority than those which involve a higher proportion of imported material costs. It would help if the job generation aspects were to be evaluated in order to determine BBB priorities.
I am also in favor of ‘small-ticket’ projects. For example, I hope that Bangko Sentral ng Pilipinas (BSP) will encourage banks to be more proactive in lending money on agriculture and domestic housing projects. The latter have a good blend of skilled, semi-skilled, and unskilled labor requirements. These are more helpful to the economy than car purchase loans which help foreign economies more than our own.
***
The poverty incidence has to be rising. By how much? Currently accurate data does not seem to be readily available.
The Philippine Statistics Office has carried out poverty analyses on a triennial basis. The 2018 exercise showed that we were winning the battle against poverty compared with the 2015 data.
Assuming that the next exercise will be done on schedule in 2021, it will surely show that poverty incidence is rising again.
We need a more effective social amelioration program./PN
