"The economy went dead. It has to be revived."
On Monday, June 1, 2020, most Filipinos will enjoy the benefits of relative freedom. June 1 is the first day after Asia’s strictest and the world’s longest lockdown ends, on May 31.
After 78 days, relative freedom descends on the National Capital Region, Baguio City, Pangasinan, Region II provinces (Batanes, Cagayan, Isabela, Nueva Vizcaya, Quirino and Santiago City); Region III (Aurora, Bataan, Bulacan, Nueva Ecija, Pampanga, Tarlac, Zambales, Angeles City, Olongapo City); Region IV-A (Cavite, Laguna, Batangas, Rizal, Quezon, Lucena City); Albay province in Bicol; Visayas areas, except Cebu City but including Iloilo City, Region VII (Bohol, Cebu province, Negros Oriental, Siquijor, Mandaue, and Lapu-Lapu City); and for Mindanao—Zamboanga City and Davao City.
Easily, these cities, provinces and regions, together, account for 85 percent of the country’s production of goods and services, or GDP. Annually, GDP is valued at P19.5 trillion. So 85 percent of that is P16.57 trillion. Daily, the regions under lockdown were producing a combined P45.39 billion of economic production. Multiply that by 78 days, you get P3.5 trillion—what the country lost in value of goods and services foregone.
Per my calculation, the lockdown rendered jobless 32 million workers, impoverished half of the Philippine population, and brought GDP growth rate to its lowest level in 36 years, 0.2 percent decline in the first quarter of 2020.
Government data shows much lower figures of unemployment and poverty incidence occasioned by the coronavirus crisis. But it does not reckon with the underground or shadow economy which is 39 percent of the national economy.
Government places losses to the economy at only P2 trillion. It also projects the worst economic growth for 2020 of only 3.4 percent.
The worst Philippine economic decline since the war was the 7.4 percent of 1984, amid the political crisis triggered by a political assassination the year before. But this year’s crisis is not just political – it is economic, it is national, and it is global. The whole world’s economy is collapsing. If 2020 is several times worse than 1984, then this year’s economic decline in real GDP could easily exceed 8 percent.
That grim economic outlook is the main reason why government has to lift the lockdowns. The economy went dead. It has to be revived.
The lockdown has been lifted despite data indicating you should not lift it.
Per Worldometer as of yesterday, the Philippines had 15,588 COVID cases, 921 deaths and 3,598 recoveries. Only one of every four (23 percent) COVID patients has recovered, one of the lowest ratios in this part of the world.
New COVID cases hit 539, the highest since the March 15 imposition of the lockdown in Luzon. The lowest new cases we hit after lockdown was 76 on April 6. Based on current data, the so-called curve, rising line of number of cases, was never bent nor made flat. It just kept on rising.
With lockdown’s lifting, what we will have is what government calls General Community Quarantine (GCQ), Level 3 lockdown.
Many activities that were prohibited under the Enhanced Community Quarantine (ECQ), what I call Level 1 lockdown, from March 15, to May 15, 2020, and the Modified Enhanced Community Quarantine (MECQ), Level 2 lockdown, from May 16 to May 31, 2020, will be allowed beginning Monday.
You can now go out of your home. But you are not guaranteed public transport. Buses and trains will operate at half of normal capacity. You cannot eat in restaurants nor watch movies. You cannot congregate – hold parties, hear mass or watch sports events. Most importantly, you are not sure whether you still have a job.
You have to accept these. They are part of the so-called New Normal.
Only Cebu, of the archipelago’s 7,300 islands, will remain under Level 2 lockdown or MECQ, until June 15, 2020. But some of Cebu’s barangays could be placed under ECQ, the first level and the strictest lockdown.
In Congress, to help revive the economy, a bill has been filed to help big corporations. This is the Corporate Recovery and Tax Incentives for Enterprises Act, otherwise known as the CREATE Act.
Under CREATE, all businesses will only need to settle 25 percent of their net taxable income starting this July, from the current 30 percent rate.
Finance Assistant Secretary Tony Lambino told CNN Philippines last week that the passage of the bill will bring the Philippines closer to the regional average, in the process attracting more foreign investments.
"A drop from 30 percent to 25 percent is actually a ₱42 billion-reduction in our revenues in the second half of 2020 alone, ₱625 billion for the succeeding five years," Lambino said in an interview. "This is really the first time the Department of Finance of the Philippines has proposed to the Philippine Congress a revenue-eroding tax reform measure. But we need it, and this is something that will really help our businesses."
Lambino said the government is looking to offer both tax and non-tax incentives for 'highly desirable' foreign investors who will serve public interest.
"If a company needs something other than tax incentives, we should be able to negotiate," Lambino said. "The jobs that will be created from these investments should be high value jobs. We are looking at high-tech sort of investments that will bring new research and technology in the country."
Lambino added that government may offer “superior incentives” to investors setting up in less developed areas of the country, to make sure jobs "go to the areas in the country where they are needed most."
Naturally, Big Business is supporting CREATE. Aside from assisting businesses at this time, said the Makati Business Club, “CREATE could attract companies around the world who are re-thinking how to mitigate supply chain risks in the wake of the coronavirus crisis. There is a potential window of opportunity for the Philippines to attract businesses looking to diversify global locations.”
Big Business is also seeking reform of the country’s labor laws. The almost guaranteed employment policy in place since the 1970s will be gone. Every worker will be deemed a casual, subject to firing anytime.