SALCEDA SEES 9.6% Q2 CONTRACTION; PUSHES 2 BILLS’ OK

THE Philippine economy could contract to as deep as 9.6 percent in the second quarter of the year with the continuing impact of the Covid-19 pandemic, the House Ways and Means panel chairman said at the weekend. Albay Rep. Joey Sarte Salceda said there is still a chance the country might enter a period of positive growth during the year if Congress approves the proposed P1.3-trillion Accelerated Recovery and Investments Stimulus for the Economy (ARISE) and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. “Q1 GDP growth was -0.2 percent, but the real cost is the opportunity cost. We economists speak in terms of that. What could easily have been, versus what the actual GDP growth figures were. Considering we could have easily grown by 6.5 percent in Q1, the opportunity cost is essentially around 8 percent of GDP for that quarter,” said the analyst-lawmaker. “As for Q2, I would not be surprised if the GDP contraction hits double digits, although a good estimate would be between a quarterly GDP growth of -6.5 percent to -9.6 percent. Again, considering opportunity costs, that’s easily a cost of 13 percent to 16 percent more of quarterly GDP that could have been realized if we were under normal circumstances,” he added. Salceda said if the country enters negative growth during the third and fourth quarters, its ability to achieve poverty reduction and countryside development goals will be significantly delayed by several years. “That is why while we still can, we have to boost the economy with the right signals—one, that we are fully capable of rooting out Covid-19; two, that we will support the economy through a sufficient spending plan; and three, that we will support business expansion through CREATE, the new Citira [Corporate Income Tax and Incentives Reform Act],” he said.

Improving performance

MEANWHILE, the House leader said improving the Department of Health performance is the key to unleashing the creative powers of the stimulus measures meant to revive a Covid-devastated economy as lockdowns in the pandemic shuttered most businesses. “Stimulus won’t work and will just be wasted in a lockdown. Ultimately, it is all about confidence—confidence in health, confidence in incomes, confidence about employment, confidence in growth in that order,” he said. “Both those said figures are almost entirely behind us now, and any damage those figures would have meant was already incurred. What matters now is how do we recover from this?” he said.

He said the government must improve business and consumer confidence to secure a “V-shaped” recovery.

“We will enter positive territory, and achieve a V-shaped recovery if and only if the government does its best to improve business and consumer confidence by actually convincing people that it’s safe enough to buy and sell things,” he said.

“You can’t do that without aggressive and exhaustive mass testing and tracing [by the DOH], and without the right tax and spending signals,” he said. 3-decade legislation MEANWHILE, Salceda said the urgent passage of reform bills is “the right thing to do for the country.”

In response to criticism that CREATE, the second package of the comprehensive tax reform program, is being “rushed,” the measure’s principal author said Congress has been discussing it for three decades now.

“We’ve been at it for three decades, and this administration has approved this reform since 2018. I don’t know if anyone can call that rushing, but my first term was in 1998, and every Congress from that year, I have filed some version of this reform. If this passes this year, it will be the culmination of decades’ worth of work, and not some rush to get it done,” he said.

The House tax panel chairman said that as early as 1998, he has already filed the “Subsidy Council Act,” which is “the intellectual ancestor of a performance-based, time-bound, targeted, and transparent regime” under CREATE.

“Then as now, I would dare opponents of fiscal incentives reform: show me your financial statements, and let me see how the reform hurts you, so that we can make adjustments. After all, my career before being a congressman involved analyzing financial statements—so there is nothing there that I will not understand. I’m on my fifth term in Congress now, and no one has taken up that request among all the opponents of the reform,” he said.

“I respect the minority of economists who have reservations about this reform. But the consensus among leading economists and captains of industry has been simple: just get it done now,” Salceda said.

The lawmaker said the country lost $12 billion in investments over the past threeyearsduetothedelays.lettingthat number increase, at this point, is a sin of policy-making omission, he added. Economic asylum

AS for the country’s strategy to lure investors seeking “economic asylum” from China due to Covid-19 and Uschina trade tensions, Salceda said that

there can be no attracting new investors without ending the uncertainty.

“So, downright, the proposal to delay it is a bad idea. If you were an investor, would you invest in a country that keeps postponing tax policy, or would you go to one where the conditions are more certain? We can add sweeteners when we get there. Besides, this country has some of the strongest labor and financial fundamentals in the region. And under the new CREATE, there is no chance that we will miss elephant-sized investments like Samsung. But first, let’s get there. After three decades of discussions, let’s pass this now,” he said.

“I can count 16 senators who now support the enactment of CREATE. It’s past the point of a debate on whether it should happen. It will happen. And it will be the right thing to do for the country if it does. Our country will be all the better for it,” he said.