KamalAEAn 2021: The Road to Economic Recovery

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KamalAEAn 2021: The Road to Economic Recovery

By the AEA Publications Team

 

Last week Friday, March 5, 2021, the Ateneo Economics Association (AEA) held its much beloved KamalAEAn talk. As AEA’s partnership talk with Ateneo’s Talakayang Alay sa Bayan (TALAB), KamalAEAn provides an avenue for economic discourse by inviting professionals to engage and educate Ateneans about the economic relevance in various nationwide issues. 

This year’s talk was entitled “KamalAEAn 2021: The Road to Economic Recovery” and delved into economic challenges the Philippines has faced amidst the global pandemic as well as possible opportunities the nation can take to alleviate the recession. Featured in the talk were keynote speakers Mr. Ray Gomez of the National Economic and Development Authority (NEDA) and  Ms. Zy-za Suzara of the Institute for Leadership, Empowerment, and Democracy (iLEAD), both of whom focused on government projects, programs, and budgets as pathways to economic recovery. 

In the first half of the session, Gomez explained the current situation of the Philippines and gave some choice government projects enacted to revive the economy. By the end of 2020, the Philippines’ GDP had contracted by 9.5 percent, which is the lowest contraction since 1947. Looking at NEDA research regarding the average Filipino households, Gomez showed that during the pandemic there was an average income loss of PHP 23,000 per worker because of quarantine, with about 60 percent of parents foregoing 20 percent of their income to accompany their children through online learning. Overall, that equated to a total income loss of about PHP 1.04 trillion in 2020. Furthermore, while unemployment rates are slowly decreasing from their spike in early 2020, the Philippine Statistics Association showed that NCR unemployment showed little improvement under GCQ (15.8 percent at peak in 2020 to 12.4 percent by Q4) while areas outside NCR showed far more improvement (18.6 percent at peak in 2020 to 7.7percent by Q4). Despite the year that has passed, about 3.2 million people in the NCR are still hungry, largely due to the restriction of GCQ.

Despite all this bad news and the ongoing pandemic, Gomez highlighted the importance of the transportation sector to economic recovery. Because of the strict quarantine guidelines on travel, there is now less capacity to accommodate for social distancing. This leads to a shortage in transportation and a contraction in the transportation sector further hurts the economy. The reason transportation holds so much power over the economy is because transportation is involved in almost every sector of the economy and aspect of our lives: from providing public transport for workers to delivery for stores. With the importance of transportation in mind, Gomez shared a current ongoing project of the government, which is to invest in bike lanes that connect all around the NCR. The project, pushed by DOH, DPWH, DILG, and the DOTr, hopes to alleviate the transport shortage and reduce the number of vehicles on the road. This solution will not only help the economy recover by getting more people to the places they need to be, it will also help with the NCR’s air pollution, all while still being able to follow the social distancing protocols of the DOH. 

With all this being said, Gomez emphasized the economic concept that “nothing is from Heaven” and “everything is a trade-off.” While the government’s response to the pandemic is far from perfect, Gomez highlighted that many people are working hard to heal the economy. There are many trade-offs that will have to be made and many obstacles that need to be faced. He closes with the message that to come up with solutions, we have to acknowledge the constraints in the immediate term while working on expanding them, and that to maximize impact, we need to give our best efforts. Don’t stop at what we need to do, but think of how we can do it.

The second keynote speaker of the evening was Ms. Zy-za Suzara of iLEAD, a policy think tank that focuses on public finance and good governance. In her presentation, Suzara also discussed the wounded state of the Philippines’ economy, as well as analyzed how the Philippines government responded to the crisis in terms of budget allocation. 

To further expound on Gomez’s point, Suzara explained that in economics there are trade-offs, but we cannot trade health for economic recovery. Out of all the ASEAN countries, the Philippines so far has the slowest recovery rate. By April 2020, about 77 percent of firms in all sectors temporarily closed down, and by July 2020, about 15 percent of firms closed permanently. By February 2021, inflation was on the rise again with -4.7 percent. While the Philippines usually has OFWs as an economic safety-net, this time would not be the case as about 388,000 OFWs were repatriated over the course of the year. The question Suzara asks now is what programs has the government initiated to help the situation and is it effective in any way?

For the answers, she showed the General Appropriation Act (GAA) and the Bayanihan 1, 2, and proposed 3. The GAA 2020 allowed the government to appropriate the budget for 2020 to other pressing concerns related to the pandemic, while Bayanihan 1 and 2 gave special power and regulations to different sectors affected by the pandemic. Including the proposed Bayanihan 3, there has been a total pandemic response of Php 565 Billion. However, it is with the new budget for 2021 where Suzara points out that the government is scrimping on aid.

Suzara argues aid is disproportionately small compared to the scale of the economic crisis we are facing. For example, while Bayanihan 2 gave about Php 165.5 billion in relief, the real GDP losses in 2020 were Php 1,843 billion. Furthermore, the Social Amelioration Program is only good for two months and firms receive little to no aid, which will only make it harder for the economy to recover.

The most crucial analysis Suzara showed in the 2021 budget, which has the wrong priorities. In an overall view, the new budget has severe cuts for health and economic aid, and instead funds many policies that won’t address them, such as Build, Build, Build, corporate tax cuts, supercorporation, and the National Task Force to End Local Communist Armed Conflict (NTF-ELCAC), the last of which received Php 16.44 billion. Furthermore, while many banks receive government help, there is still not much help for the average Filipino citizen. At this point, Suzara emphasizes the need for better fiscal policy over monetary policy, highlighting that fiscal stimulus is what’s needed to jumpstart economic growth. 

 Suzara continues her presentation by giving in-depth analysis of the entire 2021 budget. Entitled “Reset, Rebound, Recover,” the 2021 budget focuses too largely on infrastructure rather than sectors directly affected by the pandemic. For example the DOH budget decreased from Php 181 billion to Pho 135 billion. While there is additional support for livelihood and emergency employment, specifically for the Department of Labor and Employment Osec and the Overseas Workers Welfare administration, there is less assistance for MSMEs and the tourism sector. DepEd received a Php 16 billion increase in flexible learning options, this is still not enough to support online learning and there’s no specific budget item to prepare for safe reopening of schools. In the DOTr, funds that were initially put in subway projects have since been reallocated to aviation and maritime infrastructure, with little budget for service contracting PUVs and subsidies for displaced PUV drivers. More shockingly, Php 70 billion of funds for vaccines are parked in Unprogrammed Appropriations.

A bulk of the budget has strangely gone to infrastructure as reflected by the huge increase for DPWH, which received a 58 percent increase. There were also major funding increases in 2021 with 41 percent increase in local programs and 36 percent increase in  Convergence and Special Support programs. What’s more astonishing is that the PNP and AFP budgets both received an increase, with the AFP Modernization Program receiving Php 2 billion. Suzara says that the roughly Php 20 billion used to end the insurgency could have been used for something more directly related to pandemic concerns and the economic recession the Philippines is experiencing. 

Overall, Suzara showed that the budget does not reflect the current needs of the Filipino citizen. Her concluding message left the audience asking “What can we do as average citizens?” The answer she shared is for the students, specifically economics students, to learn about Fiscal Policy and take interest in the National Budget, remembering not only is the budget highly technically but also political. She challenged the students to analyze and understand the priorities of the government through their budgetary policy and make sound judgements on our current situation through this economic lens.

 

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