By John Carlo Tria
A lot of discussion had emerged out of the recent announcement of global finance firm Goldman Sachs that the current economic crisis is four times worse than the 2008 housing crisis, and of the International Monetary Fund’s announcement of a recession worse than the great depression of the 1930s.
In truth, we may not see the end of this economic downturn until a vaccine is found. Uncertainty and anxiety is so strong in today’s financial markets.
Luckily for us, our national government has put in place an unprecedented stimulus package to help both the vulnerable sectors and small businesses.
Let me Share with you a portion of a piece that first appeared in online site resurgent.ph:
The truth of the matter is that the national government has already allocated unprecedented 275 billion pesos and is getting ready to apply an additional 1.17 trillion or so pesos as part of the bounce back plan in the COVID 19 fight. There is also 31 B in additional fund for the Department of Agriculture which involves loans for farmers and the palay buying program.
Specifically, the government will provide some 3.4 million employees in small businesses a wage subsidy of P5,000 to 8,000 per eligible worker affected by the Enhanced Community Quarantine (ECQ) in Luzon and other parts of the country that is currently being implemented to contain the spread of the 2019 coronavirus disease (COVID-19) disease.
Unlike in previous disasters, the government’s decision to name the amounts to be given to each beneficiary ensures that the beneficiaries can demand the full value on receipt of specific amounts in cash. This is critical given that the main implementation will be conducted at the barangay level to prevent mass gatherings and long lines common in relief goods distribution, rather than benefits in kind which may be difficult to audit or account for similar to what happened in Typhoon Yolanda.
With this, it is clear that we will need substantial financial resources to keep the economy stimulated. Funds coming from global financial markets to augment current financial resources we have.
This is true for the public financial sector as well as our private banks. They will need to access funds to cover the high amount of withdrawals, and the higher level of financing that the almost 1 million business establishments will need to access to keep themselves afloat over the next several months, their employees paid and additional financial support like advances on 13 month pay benefits that were given to many.
For this reason, government must do its best to keep our BBB+ credit ratings in place. This is a bedrock of financial credibility upon which we can borrow additional funds needed to cover additional support being called for. This is also the benchmark upon which the capacity of our private banks to access globally available funds is based. In the midst of all this economic uncertainty, a country with solid investment grade ratings gets preferred rates, similar to businesses with a good credit standing.
Thus, the call by Senator Imee Marcos to even temporarily halt debt payments is not advised, as it will force the global financial community to lower our ratings. This, in turn, will force us to pay higher interest rates than we already enjoy and shorter terms than the periods we can now access.
