Congress urged to pass economic stimulus bills by August to effectively restart economic engine

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Metro Manila (CNN Philippines, July 9) – Congress must act swiftly in passing the economic stimulus bills by August to keep on track the Philippine economy’s gradual recovery from the COVID-19 pandemic, an economist said on Thursday.

BDO Unibank chief market strategist Jonathan Ravelas said the potential recovery of the country’s economy could happen at the end of the second half of this year.

However, he pointed out that several geopolitical factors may affect the country's efforts to bounce back if the economic stimulus bills will not be passed by Congress in August.

He cited the United States presidential elections in November and the ongoing tensions between the U.S. and China as the major geopolitical risks that will have an impact in the country’s road to economic recovery.

“Further delays, let’s say if it’s not passed in July or August, will lessen the probability of U-shaped recovery,” Ravelas told CNN Philippines’ Rico Hizon on The Final Word.

U-shaped recovery is an economic situation when the country goes into recession but generates a slow pace of recovery after.

The market strategist emphasized that economic stimulus bills, such as the Accelerated Recovery and Investments Stimulus for the Economy of the Philippines Act (ARISE Philippines Act), are important in providing short-term and medium-term support for the country’s economy.

The ARISE Philippines Act is a good fiscal measure to help small, and medium enterprises (SMEs) recover from the negative economic impact of the COVID-19 pandemic, he said.

“SMEs, which is the groundwork of our economy, and eventually the ones who generate jobs will eventually be able to keep small businesses afloat and eventually keep jobs,” Ravelas explained.

The ₱1.3-trillion ARISE Philippines Act has been approved by the House of Representatives in third and final reading in June. Other economic stimulus bills passed by the Lower House in final reading last month are the ₱1.5-trillion COVID-19 Unemployment Reduction Economic Stimulus (CURES) Act of 2020 and the Financial Institutions Strategic Transfer (FIST) Act.

The three economic stimulus bills have yet to be discussed in the Senate. The approval of the senators is needed for the bills to be signed into law by the President.

Ravelas noted that the fiscal policies are vital to compliment the timely monetary policies of the government.

The Monetary Board decided last June to cut the key policy rate by 50 basis points to 2.25 percent, making it the lowest policy rate in Philippine history. The move follows a series of aggressive cuts meant to soften the economic woes brought about by the pandemic.

“The Central Bank has been very aggressive in trying to bring down the cost of doing business," Ravelas said. "That should eventually help provide some relief for companies."

He also reminded the government and the private sector to work together to ensure consumer and business confidence will improve as the country grapples from the dire economic effects of the pandemic.

He added the government badly needs revenues now, the reason why the economy must gradually reopen and recover.

“That could only improve if we get to see COVID-19 cases coming down,” said Ravelas.

To date, the country has 51,754 confirmed COVID-19 cases along with 1,314 deaths and 12,813 recoveries.

Researchers from the University of the Philippines said on Thursday their earlier projection of 60,000 COVID-19 cases by the end of July can go higher, estimating the country’s infections to go over 70,000 at the end of the month.