It's still the economy, stupid!
The next administration faces a serious challenge on how to revive an ailing economy severely impacted by the COVID-19 pandemic.
Impact of COVID-19 on the national economy
In 2020, the Philippine economy contracted by a record 9.5% in terms of year-on-year (y/y) GDP growth with the imposition of restrictive quarantine measures. This was by far considered the largest decline ever recorded since the National Accounts data series for the Philippines commenced in 1946.
Other macroeconomic indicators in 2020 show the severity of the country's economic decline:
Ø Household final consumption expenditure down 7.9% y/y
Ø Gross Capital Formation down 34.4% y/y
Ø Gross Capital Expenditure down 18.3% y/y
Ø Exports of good services down 16.3% y/y
It is good to note however that the gradual reopening of the economy has prompted the Asian Development Bank to set its GDP growth forecast for the Philippines at 4.5% in 2021 and 5.5% in 2022. OFW remittances continue to be the economy's saving grace as it accounted for about 10% of the country's GDP in 2020 and has recorded positive year-on-year growth of about 3% based on latest figures in July 2021.
Economic Rehabilitation and Recovery Plan anchored on a Business Recovery Strategy, Infrastructure Development and Harnessing the Digital Economy
The next President needs to put in place a comprehensive Economic Rehabilitation and Recovery Plan with realistic short, medium, and long-term goals.
The government cannot be in a perpetual state of giving out dole-outs; hence it must set out a clear program on how to get people back to work and entice small/medium-sized businesses to reopen. The government must set out to provide an array of credit facilities for small businesses to have the capital to reopen. The government needs to act strategically with its meager resources particularly on striking a balance when it comes to allocating funds for lending programs as against allocation for new technologies and systems to empower small/medium businesses to leverage on available digital platforms for enterprise development.
To pump prime the economy, continuity in terms of the current infrastructure program is necessary. There are a couple of infrastructure programs in the pipeline which can be approved immediately once feasibility studies and due diligence works are completed based on their viability. Infrastructure agencies such as the DOTr and the DPWH must also act quickly to resolve pending private sector proposals. To ensure infrastructure quality, public and privately funded projects must be assessed based on the conformity of practices and methods with international construction and engineering standards.
It is also time for us to harness the potential of the digital economy. Several international companies are willing to setup digital infrastructure projects in the country; hence we must provide an atmosphere conducive for investment and ease of entry. The digitalization of government processes can serve as a tool not only to reduce human intervention in the fight against corruption but also to reduce red tape which seen as a barrier to the entry of new players.
The country's economic recovery hinges on the clarity of the government's economy program, flexibility and predictability of economic policies, and ability of all sectors to work together to ensure people are back to work and businesses are back in operation. Without a clear and visionary leadership, we may be looking at sustained periods of slow economic growth in the next 6 years.
It's still the economy, stupid!
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