DESPITE the fact that economic growth and activity have slowed down as a result of the persisting COVID-19 pandemic, government spending should still continue to fasttrack economic recovery.
According to economist and Marikina (2nd District) Rep. Stella Luz Quimbo, government needs to spend even in the midst of a crisis in order to boost confidence levels of the public, especially businesses.
“In a bad economic crisis, confidence level is very low—confidenceof consumers, confidence of your workers. Everyone’s afraid. Fear and anxiety have set in. Even business owners, they don’t want to invest. In fact, they’d rather close shop. So this is a situation where government must step in. If the government is not spending enough, then our confidence will be deflated,” Rep. Quimbo said as a guest in an episode of Market Sense, 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.
“We need government to spend because there’s a lot of market failures arising from the pandemic,” she added.
BDO Trust Group is looking at a gross domestic product (GDP) contraction of 9.6 percent in the third quarter, and a 6 percent contraction in the fourth quarter to bring its full year 2020 GDP projection to negative 8.3 percent.
Nonetheless, to echo Rep Quimbo’s call for more government spending, BDO Chief Investment Officer Frederico “Fritz” Ocampo said the country is poised for a recovery of 6.6 percent in 2021, as 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 percent 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 expressed 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.