The past several months where various levels of community quarantines were implemented because of the COVID-19 pandemic, the lack of activity was seen to have stalled economic growth and development.
However, a prominent legislator said that despite the pandemic, government spending should still continue to fast track economic recovery.
During a recent episode of “Market Sense,” a monthly webinar organized by the BDO Trust Group, Marikina 2nd District Rep. Stella Luz Quimbo told Frontpageph.com that government needs to spend even amid a crisis to help boost confidence levels of the public, especially businesses.
“In a bad economic crisis, confidence level is very low—confidence of consumers, the workers. Everyone’s afraid. Fear and anxiety have set in. Even business owners, they don’t want to invest. In fact, they’d rather close shop. So this is a situation where government must step in. If the government is not spending enough, then our confidence will be deflated,” Rep. Quimbo said.
Market Sense is a monthly webinar series that combines the latest economic and market developments with seasoned expert advice to help investors take control of their investments and grow their wealth.
“We need government to spend because there’s a lot of market failures arising from the pandemic,” she added.
Rep. Quimbo is one of the principal authors of House Bill No. 6815, or the Accelerated Recovery and Investments Stimulus for the Economy of the Philippines or the ARISE Philippines bill which was already approved by the Lower House.
The bill calls for the release of P1.3 trillion in economic stimulus package to jumpstart the economy’s recovery from the pandemic in the next four years. It aims to offer various forms of assistance to micro, small and medium enterprises (MSMEs) and other sectors adversely affected by COVID-19, and targets to generate around 1.5 million jobs through various infrastructure projects and financial assistance to small businesses from 2020 to 2023.
Meanwhile, the BDO Trust Group is looking at a gross domestic product (GDP) contraction of 9.6 percent in the 3rd quarter, and a 6-percent contraction in the 4th quarter to bring its full year 2020 GDP projection to negative 8.3 percent.
Nonetheless, to echo Rep Quimbo’s call for more government spending, BDO Chief Investment Officer Frederico “Fritz” Ocampo said the country is poised for a recovery of 6.6 percent next year as more government spending enters the economy.
“It would allow the economy to recover, and that would be the 2021 story,” he said. “We’re facing a recession, which could be the deepest in 35 years. Therefore, the growth drivers were hurt a bit, especially consumer demand, which is 72 percent of the economy, as well as investments from large local corporates and SMEs. But as the economy slowly opens up once again, you’ll see those drivers bouncing back.”
He expressed belief that the Philippines can stand out once again in the global stage, anchored on the country’s young population.
“The Philippines had 21 consecutive years of economic expansion, surpassed only by Australia. That is a testament to the resiliency and strength of the Philippine economy. While the growth drivers were hurt during the pandemic, the strengths of the Philippine economy remained intact. For instance, our young population is still there,” Ocampo stressed.
He said that in a pandemic, the value of that young population can be seen in terms of adaptability to the digital economy, in terms of proficiency in the use of the internet. “Later on, these young population, many of them would be creating their own companies and become entrepreneurs. Many jobs were lost during this pandemic. To cope, our young population would be creating their own companies,” Ocampo explained.