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Yearender: Unrepentant economics in 2021

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IBON Foundation

The Duterte administration is weirdly fond of congratulating itself for having “game-changing” economic reforms. It first used the term to refer to tax packages crafted in 2016, then subsequently kept using it to describe all of its pet measures – infrastructure spending, rice liberalization, health financing, tax reform, national ID system, ease of doing business, and so on. It still smugly back-pats itself as 2021 draws to a close.

The choice of a sports metaphor favored by the business community is actually revealing. For the economic managers, managing the economy is really about making big business prosper most of all. It’s unfortunately not about doing everything to improve people’s lives or alleviate their distress. It’s not even really about the businesses of the little folks – micro, small and medium enterprises (MSMEs).

Throughout 2021 and to its very end, such as in slow and stingy typhoon Odette response, the Duterte administration is leaving ordinary people behind.

Rebounding

There was so much to do after 2020. The unnecessarily long and harsh lockdowns caused the worst economic collapse and joblessness since national accounts and labor force trends started to be recorded after the end of the Second World War.

Public health measures to contain the pandemic still should’ve been foremost – free mass testing, methodical contact tracing, and judicious quarantines. But the government grossly underinvested in all of these while reopening the economy.

Especially because vaccination was among the slowest in the region, this resulted in daily COVID-19 cases and deaths generally increasing through most of the year until September. At its worst, there were eight times as many cases and four times as many deaths in 2021 compared to the peaks in 2020.

The Duterte administration also refused to stimulate the economy beyond empty statements and inflated “game-changing” rhetoric. The end result is an economy that merely rebounded and is still a long way from recovery. As ever, it’s the poor who are worst off.

More rapid economic growth gave the illusion of recovery. This was however just inflated in coming from the record collapse and low base in 2020. The reported 4.9% gross domestic product (GDP) growth in the first three quarters of 2021 is from a huge -10.1% growth (contraction) in the same period last year. It still doesn’t make up even half of what the lockdowns cost the economy.

As it is, quarterly economic output is still just as low as it was three years ago in 2018. Most sectors have lost two to as much as 11 years of output. Transport, hotels and restaurants are among the most badly hit and only a few tycoon-dominated sectors like utilities and finance kept growing. GDP per capita is meanwhile down to 2017 levels.

Rough going

The crisis doesn’t affect everyone the same. On one hand, poverty by official standards grew 3.9 million to 26.1 million Filipinos in the first semester of 2021. This estimate of one out of four Filipinos poor (23.7%) is according to a low poverty threshold of just some Php79 per person per day though – as if Php80 a day is enough to escape poverty.

The number of poor and vulnerable Filipinos is more likely closer to 18 million families or some 78 million Filipinos. Around seven out of 10 households (69.8%) didn’t have any savings as of the fourth quarter of 2021. Self-rated poverty surveys meanwhile have some 79% of families reporting themselves as poor (45%) or borderline poor (34%).

These are huge numbers of families with little capacity to deal with economic shocks or calamities. It’s interesting how they might react to administration propaganda of “a strong and early recovery”.

Such poverty also belies claims that the labor market is improving. According to labor force surveys, employment is up 1.3 million in October 2021 from January 2020 before the pandemic. The devil however is in the details.

The most obvious understated detail is that officially reported unemployment over that same period is also up by 1.1 million to 3.5 million. Even by just this, the Philippines already has the worst unemployment in the region.

But the true rate of unemployment (TRUE) is probably even higher at around 8.2 million or more – consisting of official unemployment (3.5 million), correcting for the 2005 change in definition which cut those counted as jobless (initially estimated at 1.5 million), and unpaid family workers (3.2 million).

Yet the reported 1.3 million increase in employment is also misleading and doesn’t really indicate decent-paying work. This net employment creation since last year is wholly informal in irregular self-employment and unpaid family work. The increase reflects millions of Filipinos just trying to get by however they can, especially those who lost their jobs because of the lockdowns.

In terms of hours worked, the number of full-time workers is down by 1.4 million (to 27.3 million) while part-time workers bloated by 2.6 million (to 16 million).

By class of worker, there are 369,000 less wage and salary workers (down to 27.4 million); this includes 621,000 less work in private establishments only partly off-set by increased public sector jobs.

Laid-off workers and others seeking livelihoods made do with merely informal work which bloated by 1.7 million. The number of self-employed increased by 758,000 (to 11.9 million), employer in own farm or business by 354,000 (to 1.4 million), and unpaid family workers by 541,000 (to 3.2 million).

Amid govt back-patting on merely rebounding economic growth, much more ayuda to poor households and assistance to distressed MSMEs is critical to even just start to recover. This fixes the lockdown-induced collapse in aggregate demand especially among families – made worse by rising inflation since last year – and the corresponding closures and reduced operations of MSMEs.

Extrapolating from a trade and industry department survey, around 96,000 MSMEs closed shop while some 460,000 were only partially operating as of June 2021. This probably still doesn’t include tens of thousands more troubled but unregistered small businesses.

Riches

The majority of Filipino grappled with joblessness, falling incomes, depleted savings, and high prices. On the other hand, the country’s wealthiest continued to prosper often with timely government support.

The combined wealth of the 50 richest Filipinos recovered quickly and grew 30% in 2021 to US$79.1 billion (Php4 trillion). Among the biggest gainers were close Duterte allies – Manny Villar’s wealth grew 32% (to Php327 billion), Ricky Razon’s by 33% (Php283 billion), Ramon Ang’s by 13% (Php112 billion), and Dennis Uy’s by 7.5% (Php35 billion).

The Duterte administration supported big business through the pandemic. Publicly-funded road, bridge and rail projects under its Build, Build, Build infrastructure program boosted the property values of tycoons’ real estate projects and increased traffic to their port terminals. The Corporate Recovery and Tax Incentives for Enterprises (CREATE) law cut the corporate income taxes they pay, increasing large enterprises’ profits by some Php70 billion – and reducing government revenues by the same amount – just in 2021.

Pres. Duterte and his economic managers actually acknowledge their inaction and justify this by claiming insufficient government resources. The president is folksy and says there’s no money. The economic managers have a fancier term – fiscal consolidation.

Restraint

By any name the Duterte administration’s restraint is self-defeating in so many ways. Insufficient spending on public health measures increases the risk of a COVID-19 surge if new variants are more transmissible or vaccine-resistant.

Insufficient spending on ayuda doesn’t just make families suffer disproportionately from the over-reliance on lockdowns. It also represses consumption spending and aggregate demand, especially amid worsening job scarcity.

Insufficient spending to help MSMEs stops them from reopening or expanding – tightening aggregate supply and, through less hiring and lower pay, aggregate demand as well. All of this put together makes recovery uncertain and unnecessarily protracted.

The insistence that there’s no money is actually suspect. The government had a budget of Php4.3 trillion in 2020 and Php4.5 trillion for 2021. This was supported by considerable borrowing – Php2.7 trillion in 2020 and Php2.8 trillion so far in 2021.

Little of the government budget (and debt) actually went to COVID-19 response. The budget department reports just Php570 billion in disbursements for COVID-19 under Bayanihan 1 and 2, the 2020 GAA and the 2021 GAA as of September 30, 2021. This is barely half the US$22.5 billion or around Php1.12 trillion that the finance department claims to have secured in financing for COVID-19 response as of September 5, 2021.

So what has the Duterte administration been spending on amidst the biggest public health and, arguably, humanitarian crisis in decades? So far in 2021, it has spent Php702.4 billion on infrastructure (as of October) and paid Php1.13 trillion in debt service (as of November). In either case, much more than on COVID-19 response.

This just points to the Duterte administration’s real priorities. It is just using COVID-19 response as smokescreen for hugely bloated borrowing to compensate for lost revenues because of its over-reliance on lockdowns, to keep financing its grandiose infrastructure program benefiting a few, and to keep creditors happy.

For argument’s sake, would the government spend more on relief and disaster response if it had the resources? Apparently not. The economic managers are actually expecting to have some Php260 billion more than expected in 2021 – with Php150 billion more revenues and Php110 billion less spending in 2021 than targeted.

Instead of using this to alleviate extended suffering since the lockdowns hit and which was compounded by typhoon Odette in the closing weeks of the year, it is keeping this untouched to prettify its deficit targets for the sake of creditworthiness.

Realities

Little improvement can be expected in the last few months of the administration’s term when it will be most of all concerned with navigating conflicting political ambitions in the May 2022 elections. The short-sighted drive for power will, once again, trump the long fight against poverty and underdevelopment.

The coming year is looking to be tumultuous for the economy. A surge is already likely in the opening weeks of the year and will stoke uncertainty. Minus the base effect from the 2020 collapse, the economy will return to its pre-pandemic trajectory of decline – further weighed down by high unemployment, informality, and other economic scarring. If ever, a return to power of the Marcoses in the 50th anniversary year of martial law will signify dysfunctional politics taking a turn for the worse.

The consequences for the country are unclear but will almost certainly be profound. #

Govt stinginess worsens Filipinos’ suffering and PH economic collapse

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by IBON Media & Communications

The -11.5% growth, or contraction, in gross domestic product (GDP) in the third quarter, confirms that the Philippines is on its way to becoming the worst performing economy in Southeast Asia in 2020. The economy is saddled by the Duterte administration’s refusal to spend on aid for Filipino families and support for small businesses so needed amid the pandemic.

A fiscal response commensurate to the crisis at hand is critical but the economic managers are tying the government’s hands. The government package’s demand-side effort is grossly insufficient and even undermines its supply-side measures.

The Php3 trillion in government spending in the first three quarters of 2020 is only a 15.1% increase from the same period the year before. While this is larger than the 5.5% year-on-year increase in the same period in 2019, it is still much less than the corresponding 23.6% increase in 2018.

It remains to be seen how much more spending the administration can manage in the fourth quarter of 2020. The Bayanihan 2 law is supposedly the government’s main response to COVID in the remaining months of the year.

However, as of the president’s last report to Congress at the start of November, it appears that at most just Php28.4 billion has been spent so far. With only a little over a month left in the law’s effectivity, this is just 20.3% of Bayanihan 2’s Php140 billion in appropriations and just 17.1% of its Php165.5 billion including its standby fund. The report mentioned Php76.2 billion in allotments and releases which appears relatively large.

However, the same report did not mention any actual disbursements in major items especially for aid or support to small businesses or agriculture. These items with allotments released but not reported spent include: Php6 billion for the social amelioration program (SAP); Php13.1 billion for the COVID-19 Adjustment Measures Program (CAMP), Tulong Panghanapbuhay sa Ating Disadvantaged/Displaced Workers (TUPAD) and Abot-Kamay ang Pagtulong (AKAP) programs; Php9.5 billion for public utility vehicle (PUV) programs; and Php12.1 billion for the agriculture stimulus package. While there is supposedly Php8.1 billion for small businesses, only Php893 million worth of loans were reported.

There is also little real stimulus in the proposed 2021 budget. The proposed Php4.51 trillion budget is a 9.9% increase from the 2020 budget. This is however smaller than the 13.6% increase in the programmed 2020 budget from the year before, and even smaller than the historical annual average 11.1% increase in the national budget over the 35 years of the post-Marcos era. The Development Budget Coordination Committee (DBCC) actually projects an even smaller 5.3% increase in 2022 which will be less than half the historical average.

The DBCC initially projected the economy to have -5.5% growth in 2020. To achieve this, GDP will have to grow an impossible 6.6% in the last quarter of the year which is all the more impossible with the administration refusing to give meaningful aid to millions of distressed families and small businesses including in the country’s vast informal sector.

Additional direct cash assistance to households is already pitifully small under Bayanihan 2 and virtually non-existent in the proposed 2021 budget. The record joblessness and collapse in family incomes because of the government’s poor COVID response compels much larger support to alleviate wide and deep suffering.

The economic managers also keep insisting that the CREATE law’s corporate income tax cuts will most of all benefit micro, small and medium enterprises (MSMEs). This is untrue. Large taxpayers account for an overwhelming 72% of all corporate collections as of 2019 which means that large firms will be the biggest beneficiaries of CREATE. Moreover, many MSMEs are also unregistered and in the informal sector so will not really benefit from any tax cuts under CREATE.

The International Monetary Fund (IMF) projects the economy to contract with -8.3% GDP growth in 2020. This is the worst GDP performance in the region with other countries either contracting less or even registering positive growth: Thailand (-7.1%), Malaysia (-6%), Cambodia (-2.8%), Indonesia (-1.5%), Singapore (-6%), Brunei (0.1%), Lao PDR (0.2%), Vietnam (1.6%), and Myanmar (2%).

Even the IMF’s projected 7.4% GDP growth rebound in 2021 will still not be enough to bring the economy back to its level last year in 2019. As it is, the 2020 Philippine economy is going to be as small as it was three years ago in 2017, and with GDP per capita approaching as low as it was in 2016.

The Philippines’ COVID response is the smallest among those announced by the region’s major economies, according to the Asian Development Bank’s (ADB) COVID policy tracker. This earlier reported the Philippines’ response as equivalent to just 5.8% of 2019 GDP which is smaller than in Singapore (26.2%), Malaysia (22.7%), Thailand (16%), Indonesia (10.9%), and Vietnam (10.1%).

Months into the worst economic collapse in the country’s history, the Duterte administration’s obsession with creditworthiness and the myth of a fundamentally strong Philippine economy is preventing it from taking the measures needed for real and rapid recovery. Its insensitivity is placing the burden of rebound and protracted recovery on millions of poor families and distressed small businesses. #

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Kodao publishes IBON articles as part of a content-sharing agreement.

On 7th week of lockdown: 10M worker and informal earner households still waiting for emergency subsidies

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by IBON Media

A month-and-a-half into lockdown, millions of workers and informal earners grapple in uncertainty as the government’s social amelioration program (SAP) and Department of Labor and Employment (DOLE) aid are failing to reach them, said research group IBON.

Six-out-of-ten or majority of government’s targeted beneficiary households have still not received the promised emergency subsidies while funding for DOLE assistance programs has run out. The sluggish response and lack of funds highlights the State’s continued indifference, said the group.

IBON said that the sorry state of emergency relief shows how even the granting of emergency powers to the president has failed to swiftly deliver promised aid to the 18 million poorest households. This includes millions of workers in the formal and informal sectors who lost incomes and livelihoods under the enhanced community quarantine (ECQ).

The latest Department of Social Welfare (DSWD) data shows only 8.1 million SAP beneficiaries were assisted, which means that 9.9 million, or a glaring 55% of the target 18 million low-income households, still await emergency cash aid into the seventh week of lockdown.

IBON said that aid is long overdue for millions, and that the 8.1 million households helped should also be getting their second tranche of subsidies already due to the lockdown extension.

The government’s other assistance programs do not add much more.

As of April 26, DOLE reported giving cash aid to only 345,865 workers, which is just 3.2% of 10.7 million workers estimated by IBON.

Meanwhile, only 259,449 informal workers benefited from DOLE’s cash-for-work program which is just 5% of 5.2 million informal workers.

Only 40,418 PUV and TNVS drivers have received emergency subsidies – with no new recipients in the last two weeks.

The DOLE also reported that just 49,040 affected overseas Filipino workers (OFWs) have been approved to receive Php10,000 cash assistance out of the 233,015 that have so far applied, as of April 26.

The department said that the number of OFWs requesting aid exceeds the 150,000 targeted by the government. The Php1.5 billion funds under the Abot Kamay ang Pagtulong (AKAP) program for this will not be enough to cover all OFWs needing assistance.

IBON also noted that to date, only 354,875 rice farmers or just 3.7% of the country’s 9.7 million farmers, farm workers and fisherfolk have been given cash assistance by the Department of Agriculture.

Meanwhile, only 6,403 employers have been able to apply for assistance on behalf of 130,188 employees under the Department of Finance’s Small Business Wage Subsidy program.

This is just 3.8% of the 3.4 million small business employee target, and actual payout will only start on May 1.

The poorest Filipinos continue to go hungry and fend for themselves amid over-delayed social amelioration, said IBON.

To make matters worse, the Duterte administration has announced that low-income households living in areas where the ECQ has been lifted will no longer receive emergency subsidies.

IBON said with no other means to help compensate for their lost wages and incomes due to weeks under lockdown, many vulnerable families will be pushed into deeper poverty.

IBON said each week under lockdown further exposes the Duterte administration’s pro-big business and militaristic approach in responding to the COVID-19 pandemic.

If it continues to ignore the humanitarian crisis and not genuinely and substantially address the socioeconomic needs of affected Filipinos, many more will go hungry, human rights violations will rise and there will be even more unrest. #

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Kodao publishes IBON articles as part of a content-sharing agreement.

There’s funding to respond to COVID-19 – the problem is at the top

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By Sonny Africa

The Duterte administration is still not clear on what its COVID-19 response is and how much this will cost. On top of that, it also doesn’t know how to fund this because it refuses to let go of its sacred cows – infrastructure, debt service, and the accumulated wealth and profits of the country’s economic elite.

Millions of poor Filipino families are suffering the worst mass unemployment in the country’s history because of the military lockdown since March. This has even been extended for another two weeks. Yet, tragically, the nation still does not know how far it really is in dealing with its worst public health crisis ever.

It is over two months since the first confirmed case of COVID-19, nearly four weeks into the unprecedented lockdown, and over two weeks into pandemic emergency powers. The Duterte administration’s confusion and disarray in responding is unforgiveable and a disservice to the heroic efforts of so many Filipinos including in the lower levels of government and private sector volunteers.

Even worse, based on what little we know, the Duterte administration’s response is not just unclear but also slow and stingy. This means that millions of Filipinos are facing more difficulties today than ever, and also that there will be a deeper socioeconomic crisis going on long after the lockdown is lifted.

Billions to respond

The clearest sign that things are so unclear for the administration is its inability to say exactly what its COVID-19 response is and what budget is needed.

When the military lockdown was declared, the government announced a Php27.1 billion package versus the pandemic. This was a haphazard cobbling together for crude public relations purposes of mainly recycled pre-pandemic government programs, including a completely irrelevant Php14 billion for tourism.

Pressed for something more substantial, it superseded that first package and threw a Php275 billion figure into the air during the railroading of emergency powers through Congress. This supposedly consisted of Php200 billion for emergency subsidies and Php75 billion for health care.

Two weeks and two reports to Congress on the use of emergency powers later, that Php275 billion is still the representative figure and the closest thing to a summary of the government’s COVID-19 response.

In the meantime, the government reports what are meant to be impressive efforts at raising funds for its COVID-19 response – Php300 billion from the sale of government securities, Php189.8 billion in unreleased appropriations and realignments, Php121.6 billion in advanced remittances of dividends to the national government from government-owned and -controlled corporations (GOCCs), Php22 billion in unutilized cash balances and funds, and Php10.3 billion in additional cash allocations and allotments.

Mechanically adding these up gives the impression of Php644.1 billion already available from various sources. However, at least Php143.6 billion or 22% of this – the early dividends and unutilized cash – is actually not a literally new budget for the response and just about ensuring there’s cash at hand to immediately spend. The economic managers are also looking at US$2 billion from multilateral lenders.

Seeing so many numbers is bewildering – so where exactly are we?

Residents of Barangay Payatas’ “Plastikan Area” receive food aid from the group The Vegan Neighbors.

What response?

The logical place to start is from identifying what needs to be done. It’s a straightforward matter to just list what the government itself has already identified as needed, whether by the National Economic and Development Authority (NEDA) or as implied in the president’s reports to Congress.

There are the health interventions: personal protective equipment (PPE) and other logistical support for medical frontliners and responders; mass testing and surveillance; isolation and quarantine facilities in congested urban poor communities; and treatment facilities including medical supplies.

There are also the equally critical socioeconomic relief measures: emergency relief packages, cash transfers and other financial assistance, and business support for micro, small and medium enterprises (MSMEs).

And yet, so deep already into the crisis, the Duterte administration has failed to present a clear response plan to the public. Instead, the nation is fed a daily stream of anecdotal reports about its fragmented efforts. Clearly, these efforts are far from enough. The lived experience of thousands of frontliners and millions of locked-down households is stark neglect and unnecessary difficulties mounting by the day.

The president’s disorganized reports to Congress on March 30 and April 6 are of little help and in many ways just add to the confusion.

Compiling the various measures scattered in the reports shows the government apparently having plans worth Php233.9 billion. This includes Php38.6 billion for hospitals and other health facilities, Php114 million for emergency relief packages, Php154.4 billion for cash transfers and other financial assistance, and Php40.8 billion for local government units (LGUs).

This is getting close but still doesn’t correspond to the headline Php275 billion figure. The president’s reports to Congress seem to detail the Php200 billion emergency subsidies portion a little bit while leaving a gaping void in what the supposed Php75 billion for health care is about. In any case, something’s wrong if the government’s plan has to be built up in such a piecemeal manner.

Residents of Barangay Payatas’ “Plastikan Area” receive food aid from the group The Vegan Neighbors.

Slow response

The need for clarity about the response doesn’t just come from being unnecessarily obsessive-compulsive about details. Clarity about the response is the starting point of marshalling public resources and organizing the machinery for the immediate and effective response demanded by the crisis.

The disarray goes far in explaining the sluggish response of the administration to date. IBON estimates that up to 18.9 million workers in the formal and informal sector have been dislocated by the military lockdown; 14.5 million of these are in Luzon and the other 4.4 million in the rest of the country. ‘Dislocated’ is understood as work interruptions of some sort with varied risks of corresponding losses in wages, salaries and other income.

The month-and-a-half lockdown-induced disruption in incomes and livelihoods has dire consequences for the poorest 16.1 million low-income families in the country. Their monthly incomes are at most around Php20,000 or so, according to IBON estimates using data from the latest 2018 Family Income and Expenditure Survey (FIES) of the Philippine Statistics Authority (PSA). These poorest three-fifths (64%) of families are also those who have little or no savings to speak of, according to the Bangko Sentral ng Pilipinas (BSP).

The government itself has acknowledged the vulnerable situation of the overwhelming majority of the population. The Bayanihan to Heal as One Act (Republic Act 11469) explicitly said that 18 million low-income households – corresponding to around the poorest 75% of the population – will be given emergency subsidies.

Yet, weeks into the lockdown, the government response is still painfully slow and inadequate. It seems to have waited until hunger and unrest became critical. This is exemplified by the frustration of the urban poor residents of Sitio San Roque, Quezon City in the heart of the capital who were violently dispersed and, bizarrely, 21 of whom were even detained and charged.

It took three long weeks before emergency cash subsidies were released. And yet these have still so far only reached 3.7-4.9 million poor households – the government’s report is confusing – or not even one third (20-27%) of the supposed target 18 million households under RA 11469. Over two-thirds or as much as 11.5 million badly affected families are still waiting.

Adding insult to injury, the government could have reached as much as 10-15 million households immediately upon the lockdown three weeks ago. The president is also only able to report just a paltry 190,217 food packs distributed by the Department of Social Welfare and Development (DSWD). Underfunded local government units (LGUs), civil society groups, and concerned citizens have tried their best to fill this gap.

The government’s other emergency relief programs are doing even worse. The Department of Labor and Employment (DOLE) reports just 102,892 formal sector workers given Php5,000 in cash assistance under its COVID-19 Adjustment Measures Program (CAMP) – or barely 1% of 10.7 million workers in formal establishments nationwide. Only 55,934 informal workers have benefited from DOLE’s Tulong Panghanapbuhay sa Ating Disadvantaged/Displaced Workers (TUPAD), receiving just an average of Php3,121 each.

Up to 357,614 farmers and fisherfolk have supposedly been given zero interest loans under the Department of Agriculture’s (DA) Expanded Survival and Recovery Aid (SURE Aid) project, or granted loan payment moratoriums. This is just 3.7% of farmers, farm workers and fisherfolk nationwide. The president’s report however could not say how much this support was worth.

Residents of Barangay Payatas’ “Plastikan Area” receive food aid from the group The Vegan Neighbors.

Stingy response

The Duterte administration may be giving repeated anecdotal reports to give the impression of sustained help. The response however is still clearly very slow.

At least part of the reason is the government rationing the help and putting so many bureaucratic hurdles for poor families. However, the importance of ensuring that all the neediest are covered far outweighs the redundance of some less needy being included. Choosing to err on the side of inclusion means dispensing with these hurdles.

But the response is also stingy in two respects.

First, the amounts being given are very small. Beneficiaries will welcome any aid given to them but the amounts fall far short of even the government’s underestimated official poverty line of on average Php10,727 nationwide and Php11,951 in the National Capital Region (NCR).

It is also probable that reported cash transfers for the poorest are bloated because the amounts likely include prior entitlements before the pandemic.

Secondly, the Php275 billion response package is too small to provide critical subsistence support to all the millions of affected households during the lockdown and in the immediate period right after. It is also far below the order of magnitude needed to support the consumption-driven stimulus that the economy needs to moderate the economic collapse in 2020.

IBON is among many others that have pointed out that the relief measures have to be much more ambitious. Our estimate is that Php297.1 billion monthly is more sufficient and should be given for up to 2-3 months at least. This does not yet even include perhaps Php300-400 billion in crucial support for critically affected businesses especially the country’s 998,000 or so micro, small and medium enterprises (MSMEs).

Aid workers arrested by the police on alleged violations of the lockdown policy of the government. (Unyon ng Manggagawa sa Agrikultura photo)

Funding the response

The president’s lamentation in his last report on government’s response about lack of funding of course raises a valid point. Hundreds of billions of pesos are needed not just to contain the pandemic but to keep the economy from sinking further after the lockdown. More so amid the global recession. And this is not even to speak of what’s needed in the coming years to build a more stable and self-reliant economy.

This is where the Duterte administration is particularly stumbling. It either does not appreciate the difficulties faced by the people and the economy, or chooses to be insensitive because it refuses to even consider the radical measures needed to address these.

The government can find the funding for COVID-19 response measures needed – on a scale many times over its Php275 billion program – if it genuinely wants to. The administration basically has three areas of financing:

1. Budget realignment. It can realign existing budget items under the Php4.1 trillion General Appropriations Act (GAA) for 2020 and Continuing Appropriations from 2019. This includes using savings from existing projects, activities and programs to outright discontinuing them and then diverting budgets to COVID-19 response.

The president’s first report to Congress mentioned Php372.7 billion in unreleased special purpose fund (SPF) allotments. This was presumably mentioned as the initial universe of budget items that can be realigned. By the second report, Php189.9 billion was said to have already been so realigned (including Php100 billion to the DSWD); a large part are reportedly from capital outlays.

However, the government can be much more aggressive in considering budget items for realignment. The Php9.6 billion in dubious confidential and intelligence funds – including Php4.5 billion just for the president – is a start.

The Php989 billion public infrastructure program should be opened up to greater scrutiny. The feasibility studies of these projects were all drawn up at a time of giddy optimism about the economy. However previous assessments of economic and financial viability will no longer hold in today’s greatly changed conditions. At the very least, the social need for many of them will have been overtaken by pandemic-related needs.

The current crisis can also be used to justify at least a moratorium on the government’s debt payments. The SPF includes Php451 billion just for debt service on interest payments. Outside the GAA, there is also Php582 billion for principal amortization. Political will can overcome accustomed automatic appropriations and the habitual deference to creditors.

2. Solidarity financing. The administration can resort to increased borrowing but prioritizing those with favorable terms for the country. The administration has already sold Php300 billion in government securities to the BSP in a classic monetizing of the deficit. It is also looking into borrowing US$1.25 billion from the Asian Development Bank (ADB) – aside from US$8 million in grants – and possibly another US$1.1 billion from the World Bank.

However, the government can consider issuing special COVID-19 bonds targeted especially at large corporations, financial institutions and oligarchic families. There is a huge concentration of financial resources and wealth in this regard that can be mobilized beyond individual donations during the lockdown. This is debt but it can be designed more on solidarity terms rather than on crude financial metrics to minimize the burden on the government. For instance, they can be at low, zero or negative interest rates and be zero coupon; making them tax-exempt can be a sweetener. Perhaps Php300-600 billion can be raised in this way.

3. New progressive taxes. With a view to the longer term, the administration can actually consider new taxes on those who can afford this. It is worth recalling that the TRAIN Law lowered the personal income taxes (PIT), estate taxes and donor taxes on the country’s higher-income groups. This already resulted in Php117 billion in foregone revenues in 2018 – with initial projections of foregone PIT revenues of up to Php193.5 billion in 2022.

The government can consider starting with reverting personal income, estate and donor taxes to pre-TRAIN levels. This focuses on those who, even with the pandemic, are still in a much better position to contribute to the national effort. Tax levels can be fine-tuned to keep higher tax rates on the super-rich and to preserve tax benefits for middle-income households affected by the pandemic and the economic crisis to come.

COVID-19 has highlighted the critical importance of government intervention and public resources in a time of crisis. But it should also drawn attention to how significant government intervention is needed to address chronic problems of poverty, inequality and underdevelopment.

The radical shifts in economic policies the country needs after the pandemic and entering into a world economy in recession will demand huge government resources, among other interventions. Building up the public health system is just the start and the country’s agricultural and industrial system needs to be significantly and rapidly bolstered. A progressive tax system is among the many crucial policy measures to do these.

Barangay Krus na Ligas market goers call for faster distribution of releif aid by the government during the Covid-19 lockdown. (Kodao photo)

Unprecedented crisis

Time is running out for the Duterte government to put together a bold a COVID-19 response package. The country is still at the start of a steeply rising curve of infections and fatalities. After the lockdown, the economy will be facing a steeply falling curve of severe economic crisis.

Every day of delay means more distress for the poorest and most vulnerable, micro entrepreneurs and small businesses sinking, and of course the virus just waiting to spread even more rapidly once the lockdown is lifted.

The priority is saving lives and easing hardship. The problem right now is not lack of a national effort to deal with these – so many Filipinos are struggling everyday to deal with the pandemic and they deserve all the help they can get.

As so many are already realizing – the problem is at the top. #

* Updated April 12, 2020 to clarify tax proposals

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The author is the executive director of IBON.org

NDFP to work for Duterte’s ouster–Joma

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While it is still open to peace talks should the Manila government decide to resume the cancelled negotiations, the main task of the National Democratic Front of the Philippines (NDFP) is to work for Rodrigo Duterte’s ouster, Prof. Jose Maria Sison said.

In a statement, Sison said the NDFP is authorized to be open to peace negotiations with either the current government or its replacement, but “its principal work now is to work for the ouster of the Duterte regime” and help bring an end to the country’s worsening social, economic and political crises.

Sison warned that the Duterte government is on track to only aggravate the socio-economic and political crises in the country by imposing heavier taxes and causing high inflation while surely failing to curb government corruption in 2019.

“Within the year, the Duterte regime will further inflict grave social and economic suffering on the people and unleash mass murder and other human rights violations in a futile attempt to destroy the armed revolutionary movement and intimidate the people,” he said.

“The state terrorism will victimize not only the toiling masses of the people but also the middle social strata and even those in the upper classes who do not belong to the small and narrow ruling clique of Duterte,” Sison added.

Sison also warned of the possibility of a “no-election” scenario in May 2019 should Duterte decide to impose “a fascist dictatorship ala Marcos by using de facto or proclaimed martial law nationwide” and the railroading of charter change for a bogus kind of federalism.

If such a scenario happens, Duterte is capable of centralizing power in his hands and would handpick his regional and provincial agents among the local dynasties and warlords, Sison predicted.

Not peace, but surrender

Personalities close to Duterte said the resumption of peace negotiations with the NDFP is still possible.

In a press briefing at Malacañ last Thursday (December 27), government chief negotiator and labor secretary Silvestre Bello III said it is still “possible” to go back to the peace table with the NDFP.

“Anything is possible. The President’s commitment to our country is inclusive and lasting peace for our country. If it means resuming the peace negotiations, why not?” Bello said.

Bello, however, admitted that the government has shifted towards its so-called “local peace talks.”

No New People’s Army (NPA) unit has yet come forward to agree to the government’s revived proposal.

Former special assistant to the President, Christopher “Bong” Go also appealed to the NDFP not to close the door to the resumption of the negotiations.

“I call on the NPA to trust President Duterte. There is no other leader like him who will sincerely talk peace with you,” Go told reporters in San Andres town, Quezon province last December 17.


Duterte, however, recently ordered the Armed Forces of the Philippines to destroy the Communist movement in the Philippines as evidenced by his refusal to reciprocate the NPAs unilateral ceasefire declarations in time for Christmas, the new year, and the Communist Party of the Philippines’ (CPP) 50th founding anniversary celebrations.

Five tasks in 2019

“Duterte is not interested in serious peace negotiations to address the roots of the armed conflict and make comprehensive agreements on social, economic and political reforms in order to lay the basis for a just and lasting peace,” Sison said.

“What he wants is the impossible, which is the surrender of the revolutionary movement of the people,” he added.

Sison said that in view of Duterte’s anti-people governance and anti-peace stance, the people expect five things from the revolutionary movement:

  1. The CPP will perform its overall leading role in the people’s democratic revolution, “promptly, correctly and clearly”;
  2. The NPA will intensify its tactical offensives to defeat the campaign of the enemy to destroy it while carrying out agrarian revolution and mass work;
  3. The various types of mass organizations will be expanded as the source of strength of the CPP, NPA and the people’s democratic government;
  4. The people’s democratic government will be strengthened to take charge of administration and programs for the benefit of the people, such as land reform, public education, production, health and sanitation, cultural work, defense, arbitration and people’s court, environmental protection and disaster relief; and

The NDFP will further strengthen itself and cooperate with all possible allies in the broad united front in order to isolate and oust the Duterte regime from power. # (Raymund B. Villanueva)

Government losing control of economy –IBON

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The Duterte administration is losing control over the Philippine economy and the poorest Filipinos are suffering for this, research group IBON said upon the release of the August inflation rate.

The greatly accelerating inflation is only the latest in a series of bad economic news about the economy’s so-called fundamentals.

The Philippine Statistics Authority (PSA) reported that the headline inflation rate in August 2018 accelerated to 6.4 percent or its highest in almost a decade from 5.7 percent in July.

This is more than double the 2.6 percent inflation in August 2017.

Inflation was highest in alcoholic beverages, tobacco and narcotics at 21.6 percent year-on-year but inflation also worsened among food and non-alcoholic beverages, especially vegetables (19.2 percent), corn (12.6 percent), and fish (12.4 percent).

Meanwhile, from July to August 2018, steepest inflation occurred in vegetables (4.9 percent) and rice (2.1 percent).

IBON said that the rapid rise in food prices hits poor families the worst because food takes up a greater portion of their expenditure compared to higher income families.

The bottom 30 percent income group spends 59.7 percent of their expenditures on food, compared to just 30 percent for the upper 70 percent income group based on the 2015 Family Income and Expenditure Survey.

IBON estimates that the poorest six deciles of Filipino families with monthly incomes ranging from Php7,724 to Php21,119 have suffered income losses of around Php1,455 to Php3,781 due to inflation from January to August this year.

Other indicators of macroeconomic fundamentals are no better, IBON said.

The high August inflation comes on the heels of second quarter gross domestic product (GDP) growth which was the slowest in 12 quarters, the peso falling to its lowest in 13 years, first semester remittance growth the slowest in 17 years, trade and balance of payments deficits the worst in the country’s history, and gross international reserves (GIR) that are the lowest in nine years.

IBON added that the more rapid inflation means that prices are higher than ever and will remain high even if inflation tapers off in the coming months as government projects.

The government needs to become more decisive in addressing increasingly unaffordable goods and services, IBON said, adding immediate and longer term measures can be taken.

The most immediate is to stop implementation of the TRAIN law and particularly its inflationary consumption taxes, IBON stressed.

This will not arrest inflation completely but it will take away the most recent inflationary pressure that is also the one most directly within the government’s control. The government can also consider price controls, said the group.

The president has the authority to impose price controls not just in the case of calamities but also when there is illegal price manipulation and if prices of basic commodities are already deemed at unreasonable levels, it said.

The long-term solution however, IBON underscored, is to strengthen domestic agriculture and Filipino industry. These are essential to provide cheaper food, goods and services in the domestic market. This will also lessen imports and lower pressure on the peso to depreciate.

The group also said that another solution is to reverse the privatization or commercialization of water, power, education and health to take away the profit premium making these services more expensive.

These are steps that the Duterte administration’s economic managers hinder due to their stubborn adherence to failed neoliberal policies, said IBON.#

‘Local palay procurement over importation’

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“NFA should prioritize local palay procurement over importation to stabilize rice prices and avoid the continuing rice crisis because of limited NFA rice supply.”—Bantay Bigas