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Monday, June 17, 2024

Companies asked to mitigate economic shocks

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An economist encouraged the manufacturing sector to “step up” to prevent economic shocks caused by health crises such as the COVID-19 pandemic.

Bank of the Philippine Islands lead economist Emilio Neri Jr. said during the Ayala-UP School of Economics Forum the economy’s dependence on services made it more vulnerable to the pandemic and that the Philippines needs bigger low-contact industries to address this.

“It’s easier, I believe, to carry out protocols or lockdowns in economies with bigger manufacturing sectors than a highly services-dependent economy like the Philippines,” Neri said, citing the small share of manufacturing to the gross domestic product.

Neri said emerging sectors such as technology and health may compensate for industries that are unlikely to return to pre-pandemic trajectory.

“There might not be any need to force certain industries to remain the key contributors to output,” Neri said. “If you allow market forces to just move along and not have to intervene on what people should [do], it can evolve into something that can allow us to recover faster.”

Data from CEIC showed that aside from the manufacturing sector, the health, information and communications technology and power industries already exceeded their pre-pandemic levels.

Within the manufacturing sector, pharmaceutical industry has the fastest growth despite its “small” contribution to the overall figure.

“Maybe we should just allow them to discover the opportunities and not have to force people to go out and do the same things we did prior to the pandemic such that we can not only close the gap between our potential trajectory for growth but even exceed it at some point,” said Neri.

Neri echoed the World Bank’s call for increased access to utilities such as electricity and internet. The country lags behind other ASEAN countries in terms of these services and the education sector.

“If something like monkeypox gets worse and leads us to lockdown seriously again, [then] it [would] have a big impact on our economy once more,” Neri said. “If [human capital] takes the backseat, then it’s going to be a problem for the medium to long term.”

Neri also said the government should focus more on wealth and income taxes rather than rely on consumption taxes which include value-added and excise taxes imposed on goods and services.

This is in contrast to the proposal of the Department of Finance under former Secretary Carlos Dominguez in May to impose new taxes, repeal certain tax exemptions and defer scheduled personal income tax reductions to reduce budget deficits and repay pandemic-induced debts.

“Inequality cannot just be addressed by faster growth. Maybe taxation could be part of it as well. We should probably enhance wealth and income taxation a little bit more for equitable purposes,” Neri said. Lee Gabriel S. Seril

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