Economic managers confident of rebound but warn of 'divergent' recovery

ABS-CBN News

Posted at Jun 15 2021 04:36 PM | Updated as of Jun 16 2021 09:52 AM

MANILA - Quarantine measures should be lifted safely and the economy reopened in order to prevent a spike in poverty and to mitigate the risks of a "divergent" recovery, Socioeconomic Planning Secretary Karl Chua said Tuesday.

During a virtual forum, Chua warned of a divergent or K-shaped recovery wherein certain sectors become richer while more vulnerable sectors become poorer.

"If we don’t manage the risk and gradually open up, then everyone is affected. Those in category 4, those in leisure, tourism that would be more affected," Chua said.

“Quarantines don’t solve anything, they just buy time," he added.

Category 4 refers to the business establishments and activities including gyms, fitness studios, entertainment industries, and tourism.

Chua noted there is data evidence showing hunger and poverty spiked coinciding with the implementation of lockdowns. 

President Rodrigo Duterte on Monday announced that NCR Plus remains under general community quarantine (GCQ) with varying degrees of restrictions until the end of June. 

Economic managers have lowered the target gross domestic product growth (GDP) this year to 6 to 7 percent from the previous 6.5 to 7.5 percent.

A "significant downside risk" looms in a divergent recovery, Bangko Sentral ng Pilipinas Gov. Benjamin Diokno said in the same forum.

"Recovery is divergent, with significant downside risks. Greater scarring may be seen among the emerging and developing economies. Positive economic outlook for the country requires strong institutions and policy discipline.” 

The World Bank recently downgraded its forecast for the country's economic growth this year to 4.7 percent from the initial 5.5 percent. The Asian Development Bank's forecast is a growth of at least 4.5 percent.

The Philippines has maintained its "financial balance" due to its strong macroeconomic fundaments and tax reforms initiated since 2016, Finance Secretary Carlos Dominguez said.

"Our fiscal fundamentals remained solid. We did not suffer the kind of fiscal downturn that typically accompanies an economic crisis. We might appear to be behind our neighbors for now, but our recovery will be stronger because of our sound fundamentals," Dominguez said.

But Chua noted that no amount of stimulus would benefit the economy if the lockdowns remain in place.

Meanwhile, Diokno earlier said the government's vaccination program is the "game-changer" that could boost consumer confidence, loan growth and eventually drive recovery.

Budget Secretary Wendel Avisado reported that P961.22 billion of the P4.5 trillion 2021 national budget was allocated for direct and indirect responses to COVID-19.

-- with reports from Warren De Guzman, ABS-CBN News 

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