Senators eye ₧1.1-T stimulus as fiscal response to virus’ impact on economy

Senators are looking to peg a Covid-19 stimulus package at P1.1 trillion, at the least, in order to approximate the equivalent worth of liquidity injected into the economy by the Bangko Sentral ng Pilipinas (BSP) since the pandemic began.

At a joint hearing on the Covid-19 response packages held Friday by the Senate Committees on Finance and on Economic Affairs, senators heard inputs from BSP Deputy Governor Francisco G. Dakila Jr. on how the Central Bank has used monetary tools to shore up the economy ravaged by Covid-19-induced lockdowns.

Finance committee Chairman Sonny Angara and Economic Affairs panel chief Imee Marcos presided at the hours-long videoconference, called to draw inputs from the private sector and Covid-impacted sectors on the response measures that legislators are rushing before their June 5 adjournment.

On questioning by Senate President Pro Tempore Ralph Recto, the BSP official outlined the series of monetary tools resorted to by BSP, such as the series of policy rate cuts and the reduction in the banks reserve requirement ratio, among others, to mitigate the impact of the lockdowns that paralyzed industries and shuttered small businesses. This displaced—some permanently—at least 2 million workers.

Dakila was asked how much the series of moves by the monetary authorities have so far injected into the economy, and he agreed with Recto’s estimates that it’s about P1.1 trillion. Then, Recto said, any fiscal stimulus packages should “more or less” approximate that amount, if the norm in other Covid-impacted countries were to be used as a gauge.

Recto cited several countries where the monetary measures unleashed by authorities were on a “1 is to 1” ratio with the fiscal stimulus packages, in order to have a “balanced” response to the pandemic’s impact.

Supply, demand side MINORITY Leader Franklin M. Drilon had earlier raised the question of whether the monetary and fiscal authorities were factoring in the need for a balanced response, noting that the monetary tools unleashed under BSP Governor Benjamin Diokno, while adequate, respond to the “supply side, by making it easier for businesses to get funds to produce more.”

“But as valid and as large an issue is the ability of people to purchase. Baka produce ka nang produce, wala namang bibili [you might be producing a lot, but there are no buyers]” because people have no money on hand, Drilon pointed out.

The question, Drilon added, is, whether authorities are stimulating the economy by putting money in the hands of people so they’ll buy?

Sen. Risa Hontiveros weighed in, and said the implication of Recto’s point is that “the fiscal side” has to be stepped up, in order to approximate the liquidity injected into the system by the monetary actions.

For his part, Bankers Association of the Philippines (BAP) Chairman Cezar Consing said that while monetary actions are simpler to carry out as they involve only the BSP and the bankers, the “fiscal [side] is more challenging.” nonetheless, Consing noted, that the challenge is mitigated by the fact that pre-pandemic, the country enjoyed good fundamentals, such as its high credit rating.

Asked by Recto if, by taking advantage of a wider fiscal space the country risks a credit downgrade somewhere down the road, Consing said “every country is going to go to the capital markets; every country is going to risk a credit downgrade, but so what?” His stance mirrors similar views by BSP’S Diokno, who recently said the Philippines may well defer its dream of an “A” credit status while focusing on the more important task of ensuring the economy grows and people have jobs and don’t go hungry.

Which is the priority? MEANWHILE, Majority Leader Juan Miguel Zubiri sought to know from House leaders which of three Covid-related measures is well advanced in the legislative pipeline, in order to synchronize the process in the two chambers, given the June 5 Congressional pause.

“we are being asked” to move quickly on three measures, Zubiri said, citing the Bayanihan Act extension bill, the Philippine Economic Stimulus Act (PESA) and the second tax reform bill, or Citira— now renamed CREATE, for Corporate Recovery and Tax Incentives for Enterprises.

In reply to Zubiri, Rep. Stella Quimbo, co-chairman of the Defeat Covid-19 House Cluster said the House has been working on the PESA at length.

The Bayanihan 2, or the extension, is set for plenary discussion in the House next week.

The CREATE—THE tweaked version of the Citira that the House approved in September 2019—is just awaiting the Senate’s actions, as House ways and Means Chairman Joey Salceda had said earlier his chamber was willing to adopt the Senate version to avoid having to call a bicameral conference to speed things up, as long as the Senate’s CREATE version was fiscally responsible.