Given the downturn in economic development and activity as a result of the persistent COVID-19 pandemic, government investment should continue to accelerate economic recovery. The government needs to invest even in the midst of a crisis, according to economist and Marikina (2nd District) Representative, Hon. Stella Luz Quimbo, in order to increase the public’s confidence levels, especially businesses.
Continued government spending essential to economic recovery amid COVID-19, lawmaker says
In an economic crisis, the level of morale is very low. Fear and anxiety have put themselves down. Even business owners don’t want to invest. In fact, they would prefer to close their businesses. This is, indeed, a case in which the government must move in. If the government is not investing enough, it would deflate our confidence, Representative Quimbo stated in an episode of Market Sense where she appeared as a guest. “We need [the] government to spend because there’s a lot of market failures arising from the pandemic,” she added.
Market Sense is a monthly webinar series organized by the BDO Trust Group that combines the latest economic and market developments with seasoned expert advice to help investors take control of their investments and grow their wealth.
Representative Quimbo is one of the principal authors of House Bill No. 6815, Accelerated Recovery and Investments Stimulus for the Economy of the Philippines (ARISE Philippines) bill, that the Lower House has already passed. The bill calls for an economic stimulus package of ₱1.3 trillion to be released to jumpstart the rehabilitation of the economy from the pandemic over the next four years.
It seeks to provide different types of assistance to micro, small and medium-sized enterprises, and other industries adversely impacted by COVID-19, with goals to produce approximately 1.5 million jobs from 2020 to 2023 through various development projects and financial assistance to small enterprises.
Projections in 2020 and hopes for recovery in 2021
Meanwhile, BDO Trust Group is looking at a 9.6 percent contraction in the gross domestic product (GDP) in the 3rd quarter and a 6 percent contraction in the 4th quarter to push its GDP forecast for the full year 2020 to negative 8.3 percent.
Nevertheless, BDO Chief Investment Officer Frederico ‘Fritz’ Ocampo, echoing Rep. Quimbo’s call for more government spending, said the nation is poised for a 6.6 percent rebound in 2021 when more government spending enters the economy.
“It would allow the economy to recover, and that would be the 2021 story,” he said. “We’re facing a recession, which could be the deepest in 35 years. Therefore, the growth drivers were hurt a bit, especially consumer demand, which is 72% of the economy, as well as investments from large local corporates and SMEs. But as the economy slowly opens up once again, you’ll see those drivers bouncing back.”
He shared the belief that the Philippines can stand out once again in the global stage, anchored on the country’s young population.
“The Philippines had 21 consecutive years of economic expansion, surpassed only by Australia. That is a testament to the resiliency and strength of the Philippine economy. While the growth drivers were hurt during the pandemic, the strengths of the Philippine economy remained intact. For instance, our young population is still there,” Ocampo stressed.
Ocampo emphasized that the importance of the young generation in terms of adaptability to the new economy, in terms of expertise in the use of the Internet, may be seen in a pandemic. He also mentioned that many of these young people will establish their own enterprises and become entrepreneurs. During this pandemic, several jobs were lost. The young generation will establish their own industries to deal with that, he ended.
If you have any questions or if you need help with your investments, you may get in touch with the BDO Trust Group through hotline numbers (02) 8736-6108, 8736-2752, 8736-6094, or (+63) 917 302-2952. You can send an email at BDOInvest@bdo.com.ph with “Market Sense” in the subject line.