PH finance body studying Delta variant's impact on financial system

Warren de Guzman, ABS-CBN News

Posted at Jul 28 2021 07:30 PM | Updated as of Jul 29 2021 10:48 AM

PH finance body studying Delta variant's impact on financial system 1

MANILA - A government body overseeing Philippine financial stability said Wednesday it is conducting stress tests to assess the possible effects of another lockdown on the country’s financial system. 

The Financial Stability Coordination Council released its first semester report Wednesday where it noted that recovery is happening at different speeds among different sectors of the economy, and in different parts of the world. 

The FSCC, led by the Bangko Sentral ng Pilipinas, the Department of Finance, the Insurance Commission, the Securities and Exchange Commission, and the Philippine Deposit Insurance Corporation, said it is currently conducting stress tests on the impact of a prolonged COVID-19 pandemic, including a possible hard lockdown to fight the Delta COVID-19 Variant.

"Things are very fluid,” said Johnny Ravalo, Head of the FSCC Technical Secretariat. 

Ravalo said there was still a lot of uncertainty on how the Delta variant would affect the country’s financial system.

An independent research organization recently called for another 2-week lockdown to check the spread of the more contagious Delta variant of COVID-19. 

The government however brushed off this call, saying it was premature to impose another lockdown. 

Business groups meanwhile have said that if another lockdown would be imposed, they’d prefer that it be implemented in August and not during the “ber” months when businesses usually make a big chunk of their sales. 

The Philippines experienced its worst quarterly economic performance from April to June last year, with the gross domestic product shrinking a historic 16.9 percent, as the country’s most productive regions were put on hard lockdown. 

The FSCC also noted the recovery for different sectors in the Philippines was uneven, with the less educated among the worst hit.

“Despite labor market expansions in previous months, based on the reported estimates, slow recovery has been observed for those belonging in the structurally vulnerable labor sector composed of those working in the Services Sector, workers who are 15-34 years old, and workers who completed Junior High School,” the FSCC said. 

This was also reflected by the significant contractions observed in these sectors following the March-May 2021 lockdown, the council added.

“Job loss due to persistence of virus transmission and strict quarantine measures translates to an estimated 21 percent loss in income per capita (ADB estimates). Income loss has also been accompanied by the significant price increases since last year mainly driven by higher costs of production attributed to the African Swine Flu, increase in oil prices and supply-chain disruptions. Consequently, these weakened consumers’ purchasing power especially for the already-vulnerable socio-economic pre-pandemic.”

The report also noted there will be uneven, long-term losses for the already battered retail sector. 

"The reboot of activity in the retail trade sector will be more than just opening up the economy. This is where the scars of COVID-19 matter.”

Finance Secretary Carlos Dominguez stressed fiscal prudence amid calls for more fiscal spending to boost the economic recovery. 

“We will continue to exercise judicious financial management to maintain our fiscal stamina and ensure the resilience of our economy. We are keeping our powder dry for a protracted battle against the pandemic and other challenges in the future,” said Dominguez. 

After contracting a record 9.6 percent last year, the economy continued to shrink by 4.2 percent in the first quarter of 2021. 

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