MANILA – The chairman of the House Ways and Means Committee on Tuesday said the government should ramp up spending to pull the economy out of its slump, saying that saving is countercyclical during a crisis.
Albay Rep. Joey Salceda made the statement in response to an economic bulletin by the government which shows that the current account in the balance-of-payments rose to a surplus of USD8.7 billion or 2.4 percent of the gross domestic product during the first three quarters of 2020.
Salceda said that a high current account surplus means that there are greater savings than investments in the economy, which, he said, is a “troubling sign”.
“You want people to save during high growth years, but you want them to invest during periods like this… If we don’t induce firms to invest more by ramping up government spending, we’re in for extended economic sluggishness,” Salceda said.
According to the bulletin, the current account balance reverted to a surplus from a deficit last year as the economy slowed down, bringing down import demand with it.
As a result, the peso strengthened from the end-2019 level of PHP50.8/USD1 to PHP48.1/USD1 as of mid-December 2020.
“There is this misguided notion that having less imports than exports, and having more savings than investments, is always a good idea. Not during a demand-side crisis. And certainly not in our stage of development, where we need high-value goods and services to jumpstart new industries,” he said.
Salceda said with the extension of the validity of funds under the Bayanihan to Recover as One Act, there is a chance for the country to “redeem” itself by spending it all and soon.
“The principle should be simple: Spend quick. Spend wisely. Spend enough. There is still an opportunity to redeem our response, as we are extending the validity of Bayanihan II,” he said.
He said a silver lining is to purchase vaccines against the coronavirus disease (Covid-19), as the peso is strong and the country’s credit ratings are robust.
“Let us not try to cut too many costs anymore. Let’s buy the most effective and easy to administer vaccine. We can buy the best, anyway,” Salceda said.” The vaccines are now here. So, let’s buy them already. Compete in bidding if necessary.”
He noted that the economic loss of every day in quarantine is about PHP8.5 billion in economic activity, which is bigger than any increase in vaccine costs.“Bid, compete, do whatever it takes to get viable vaccines. Congress will be all-out in supporting the government to make sure there are no delays,” Salceda said. (PNA)