Ever since the Philippines identified its first COVID-19 patient within its national border, the number of cases in the country has shown nothing but a relentless surge. To curb the spread of coronavirus, the federal government has aptly declared an enhanced community quarantine on the Luzon region, a place where 50 million Filipinos call home. What followed was the immediate suspension of public transportation, closure of non-essential businesses, and a curfew, among other things.
Accountable for 73% of the country’s economic output, the Luzon region’s lockdown could possibly push the Philippines into a negative territory of 0.8% GDP contraction this year. Note that its most recent contraction dates way back to the Asian Financial Crisis when its economy shrank by 0.58%. Even in the aftermath of the financial crisis in 2009, the country had posted a modest growth of 1.15%. The current situation, therefore, is extremely dire in comparison. With that in mind, in an economy bolstered by huge conglomerates, is the corporate sector doing anything to relieve the country of its pressure?
Fortunately, the Philippines appears to be living up to its good name as a community-based country as numerous corporates have stepped up. For starters, under the instruction from the Department of Finance, most (if not all) lenders have granted payment extensions on different types of borrowing, including personal and housing loans, so as to alleviate Filipinos’ financial burden in the absence of income. To provide support for medical front-liners, SM Investments and Gokongwei Group have each forked out P100 million ($1.98 million) to acquire personal protective equipment and testing kits. In an equally heroic gesture, Universal Robina Corporation and San Miguel Corporation also donated food products to medical workers and starving daily wage earners.
Meanwhile, two of the country’s biggest telecommunication companies, Globe and PLDT, are also supplying mobile phones with preloaded call and text credits to relevant parties, such as healthcare workers, police forces, and the military. Among all corporate efforts, the most sizable one is perhaps Ayala’s P2.4 billion ($47.60 million) response package, which encompassed wages, bonuses, leave conversions, loan deferments, rent coverage for Ayala partners, and financial support for all Ayala employees under its subsidiaries. Thus, it is evident that local companies are striving to sustain the economy within their means in the face of adversity. Admittedly, despite various efforts from the private sector, it is downright unrealistic to expect that they can keep it going for any longer. This is because as business activities dry up, companies draw down on their cash reserves and eventually face the need to save up in the wake of a downturn. For that reason, support from the government is needed.
As with many other countries, the Philippine government has shown its commitment to stimulate the struggling economy. To elaborate, a stimulus package worth P27.1 billion ($530 million) was launched, of which more than half (P14 billion) is reserved for the tourism industry, the most affected sector. The program also provides financial support for acquisition of testing kits, workers and business affected by COVID-19, farmers and fishermen, free courses for upskilling and reskilling of displaced workers, as well as microfinancing and loans for MSMEs. Besides, the government has introduced a cash handout program of P200 billion ($3.9 billion) to support 18 million low-income households who have lost their sources of income amid the pandemic. In its most recent stimulus package announcement, the government brought to light a P51 billion ($1 billion) wage subsidy to employees of small businesses
Notably, this is not the first time that the Philippine government has taken matter into its own hands. During the 2008 financial crisis, the Philippine government rolled out a ‘bazooka’ that was called the Economic Resiliency Plan. At a size of P330 billion ($6.5 billion), the fiscal package mainly provided funding for government employment, social protection programs such as scholarship and food product subsidies, agriculture support, individual and corporate tax cuts, as well as large infrastructure projects. Owing to that, the country managed to sidestep a recession with GDP growth of just over 1% in 2009.
All things considered, seeing that the COVID-19 outbreak is expected to have greater implications on the Philippines’ economy than the global financial crisis, bigger stimulus packages might be needed to avoid a recession – ones that pack a stronger punch than the Economic Resiliency Plan. However, it should be mentioned that the country’s fiscal deficit is under great stress as the NEDA suggests that it might balloon to 5.4% of GDP, a level not seen before. In that case, would the Duterte administration risk ballooning the fiscal deficit to an unprecedented size or to let the economy go into free fall?