Foundation of economic recovery, 2

(Continued from May 27, 2020)

THE RESUMPTION of public works and private sector-led infrastructure projects is leading me to believe that our economy is in a position to grow by at least seven percent in 2021. This forecast is supported by many institutions such as the International Monetary Fund.

The Development Budget Coordination Committee, composed of government economic managers, believes the timely implementation of a well-targeted recovery program, alongside efforts of the private sector, will help the economy regain confidence and achieve a growth of 7.1 percent to 8.1 percent by 2021. Of course, this will depend on the availability of an effective vaccine against Covid-19.

To make sure we will get our hands on that vaccine, President Duterte’s administration is raising funds for such purpose. Once a vaccine becomes available, the government will purchase doses of the vaccine right away. Reports said dozens of vaccines had started clinical trials, with many of them showing promising results. Let us hope that one of them will become commercially available this year.

Infrastructure development, meanwhile, is part of the Duterte administration’s economic recovery plan to create jobs and sustain growth. The government is in fact spending P1.74 trillion, or 9.1 percent of the gross domestic product, this year to respond to the health crisis and support the economy.

The Department of Finance also proposed priority action plans for economic recovery, including the continuation of “Build, Build, Build” projects, subject to minimum health standards; hiring of contact tracers to ease the viral transmission; and the passage of the proposed Corporate Recovery and Tax Incentives for Enterprises Act, or CREATE, the repackaged Corporate Income Tax and Incentives Rationalization Act, or Citira.

Aside from these action plans, our economic landscape is supportive of a strong rebound next year. The 0.2-percent contraction in our GDP in the first quarter was one of the least worrisome among Asian countries. The first-quarter figure was better compared to those of developed countries, whose contractions were anywhere from four percent to seven percent.

Trade Secretary Ramon Lopez said while the risk of global recession is real, “we are making sure that this is only transitory and we are already laying the foundation for our recovery.”

Inflation rate was steady at 2.2 percent in April, while the peso was hovering at 50.60 to 50.70 against the US dollar, which marked an improvement from the previous months.

Because of the strong peso backed by our external position, the gross international reserves hit a record $89 billion in March 2020, up by $5.38 billion or 6.4 percent from $83.61 billion a year ago. This, to me, is an indication that we have ample dollar reserves to service our foreign debt.

Remittances from Filipinos working overseas, another source of liquidity in the country, remained steady in the first two months of 2020, although figures for March and April may reflect the impact of the pandemic. Data show cash remittances coursed through banks increased 4.6 percent in the first two months of 2020 to $5 billion from $4.8 billion in the same period last year.

These funds will support household spending in the country and provide a lifeline to many small and medium enterprises that were allowed to reopen by the government.

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This piece first came out in Business Mirror on May 26, 2020 under the column “The Entrepreneur.” For comments/feedback e-mail to: mbv.secretariat@gmail.com or visitwww.mannyvillar.com.ph./PN