Former NEDA chief urges gov’t to step up spending

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Credit: Read the original article from Manila Standard Business.

Former Economic Planning Secretary Ernesto Pernia on Monday asked the government to ramp up health-related spending to mitigate the impact of the COVID-19 pandemic and help the economy recover faster from the recession.Pernia said in the virtual Stratbase ADR Institute Pilipinas Conference 2020 titled “Rebooting the Economy Post-Pandemic: Cushioning the Long Emergency” that it might take another year and a half years or until the second half of 2022 before the economy could return to the pre-pandemic growth level of an average of 6 percent.“We have severe underspending in our health system, considering that we have a large population next to Indonesia. We have not done a good thing about COVID response spending,” said Pernia, who served as the director-general of the National Economic and Development Authority from 2016 until he resigned in April 2020. He was succeeded by Karl Kendrick Chua.“We have badly taken for granted our health workers,” Pernia said. He said with the “pathethic” underspending on health, the government might be trying to preserve its investment-grade credit rating.Citing data from the Asian Development Bank as of November 2020 comparing the COVID-19 response spending by ASEAN countries, Pernia said the Philippines spent only $21.65 billion, or equivalent to around 5.88 percent of the gross domestic product, lower than what its peers in the region spent.He said in the same period, Indonesia spent $115.78 billion or 10.94 percent of GDP; Singapore, $89.14 billion or 25.35 percent of GDP; Thailand, $84.09 billion or 15.96 percent of GDP; Malaysia, $80.78 billion or 22.73 percent of GDP; and Vietnam, $26.50 billion or 10.12 percent of GDP.Pernia said there was nothing to worry about being downgraded by credit rating agencies if the government spent more.“There is nothing to crow about our credit rating. The other five ASEAN countries had spent more on COVID response and still maintained their credit ratings,” Pernia said.The Philippines has investment-grade ratings of BBB+ from S&P Global Ratings, Baa2 from Moody’s Investors Service, and BBB from Fitch Ratings.“We are where we are because we failed to spend or sow enough,” Pernia said, citing the economic contraction of nearly 10 percent in the first three quarters, triggered by the coronavirus pandemic.

“The Philippines could markedly ramp up its COVID response spending and still keep its likewise respectable credit ratings,” Pernia said.Pernia said an increased spending should include fortifying the health system capacity, raising the remuneration and working conditions of healthcare personnel and building and improving social infrastructure extending to the provinces, such as hospitals, laboratories and medical schools like UP Philippine General Hospital.Pernia said spending in these areas of concern, which was long overdue, would magnify the impact of other economic stimulus measures such as for physical infrastructure to include digital connectivity, social amelioration programs and assistance for distressed small businesses and unemployed workers.Meanwhile, former Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said it was inappropriate to say that the worst was over in terms of the pandemic, as he downplayed the previous optimistic statements of some Duterte administration’s Cabinet officials.He said while some signs of economic recovery such as lower decline in external trade as of late, softer drop in manufacturing and expansion in capacity utilization emerged, all of these remained “tentative.”“The economic scars are still evident and should be managed if we are to build confidence and restore economic recovery,” Guinigundo said.He proposed that the government demonstrate primacy of pandemic mitigation alongside economic revival; repurpose some budget items; and sustain policy and structural reforms.“It is unrealistic to assure that we have flattened the pandemic. It is too early to claim victory over the pandemic,” Guinigundo said.The gross domestic product contracted 16.9 percent in the second quarter and 11.5 percent in the third quarter.

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