NEDA: ‘NEW NORMAL’ POSES BRAKES ON ECONOMIC GROWTH

WITH social distancing and sporadic lockdowns curbing a lot of activities, the Philippine economy may not be able to repeat its recent economic success under the “new normal,” according to the National Economic and Development Authority (Neda).

In a presentation at the House of Representatives (HOR) Committee on Economic Affairs, Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said the “new normal” will prevent the economy from relying on external demand to boost the economy while on the domestic front, there could be spikes in the deficit-togdp ratio and lower government revenues.

The new normal entails four realities—social distancing; sporadic lockdowns; strict hygiene and sanitation protocols; and the looming Covid-19 threat until a vaccine is created, which, Chua said, could only happen years from now.

“Full economic output will not yet be achieved unless we do significant changes in the way we do business and live our lives,” Chua said. “In terms of macroeconomy, we would have to be looking at a lower potential GDP growth.”

Prior to the crisis, Chua said the economy was among the fastest growing in the region. The economy posted an average growth of 6.6 percent between 2016 and 2019.

Chua said, however, the Philippine economy is now faced with external risks such as the contraction in global economy; the tightening of liquidity; increased volatility of capital flows; and overall slowdown in trade.

These will have an impact on the country’s export revenues and foreign direct investments (FDIS), the growth of which largely depends on the overall health of the global economy.

Domestically, Chua said, the lower government revenues and higher deficit spending may limit the government’s ability to prime the economy.

However, he said the government must still stimulate the economy within the bounds of “constitutional and fiscal prudence” limitations.

Moving forward, Chua said, the government should focus on agriculture as a main driver of the economy. This means putting more emphasis on agriculture production and the entire food value chain.

Chua said this attention on agriculture will give Filipinos confidence that their basic needs are available at affordable prices.

For this to happen, he said there’s a need to thoroughly discuss the value chain, supply chain and support services needed to make production more efficient.

The Neda acting chief said the government will also have to prepare for “heightened risk of financial insolvency” of firms and industries. This is where the stimulus bills would be crucial.

Should firms and industries become insolvent, they will close and such will negatively impact on employment. Already in April, the number of jobless Filipinos reached 7.3 million.

This was largely due to the 5 million Filipinos who became jobless in April because of the lockdowns. In January, there were about 2.3 million jobless Filipinos.

“The rest are really about organizing better the production chain in this new normal and shift really to minimum standards in production, transportation, a greater role for e-commerce and also reorienting how our logistics system operates,” Chua said.

Priority sectors

IN order to boost growth after the pandemic and ensure that the country’s long-term vision is met, Neda Undersecretary Rosemarie G. Edillon said there are priority sectors under the Philippine Development Plan (PDP).

These include housing and urban development, which will spur construction-related manufacturing activities, specifically those geared toward house construction as well as utilities— electricity, gas and water.

Another industry is overall manufacturing, such as food processing, transport, construction materials and other manufacturing industries.

The list also includes connectivity, such as roads and bridges, airports, vehicles, transport systems and communication.

Edillon said another important industry for the long term is education services and retooling services, as well as tourism and allied services.

Agriculture, Edillon said, is also crucial since this revolves around food production, commercial and industrial crops, and biotechnology.

The Neda official also said a crucial long-term industry is health and wellness, which offers primary, secondary and tertiary care; wellness facilities; and sports and fitness facilities.

Of a particular interest, Edillon said, are pharmaceuticals. She said since the country has rich natural resources, it is possible for the Philippines to have its own pharmaceutical industry.

“Our biodiversity is high so it makes sense to have our own industry on pharmaceuticals. In the past there have been a lot of bioprospecting, but we did not benefit from it. I think there will still be some [discoveries]. So we included drug discovery and exploration,” Edillon said.

However, Edillon said the list of industries that can propel the country to high economic growth after the pandemic is still being completed as of press time.

The new normal

EDILLON said the “new normal” will see a lot of changes in household expenses; investments; government; and the rest of the world, particularly in terms of exports.

Under the new normal, households will have high demand for health products as well as health-boosting commodities; soap, hand sanitizer and alcohol; and face masks.

Households will also require Internet connection; electronics; increased use of utilities due to work- and study-at-home arrangements; and bikes as well as motorbikes for transportation.

Edillon said households will have lower demand for durables; non-essentials; and tourism and travel products.

For investments, Edillon said there will be higher demand for delivery vans and motorbikes; digital connectivity; and electronic equipment.

However, she said there would be lower demand for air transport and office spaces since work-fromhome arrangements will be imposed.

The government, the Neda official said, would also have high demand for digital connectivity; electronic equipment; health-care services; health-care personnel; and social protection. It will have lower demand for office space.

Edillon said the country’s export markets would also see higher demand for electronics equipment; health-care supplies and equipment; health-care services; health-care personnel; and, possibly, business-process outsourcing. There would also be less demand for travel and tourism.