The International Monetary Fund made an honest assessment on the prospects of global economic recovery amid the coronavirus pandemic. The global economy has shown signs of bouncing back but a full recovery, says IMF chief Kristalina Georgieva, is “unlikely” without a vaccine.
The funding institution called on governments to continue supporting workers and businesses to prevent bankruptcies and job losses around the world. The partial reopening of the global economy and various fiscal stimulus programs, indeed, led to increased factory production and employment.
For a poor nation like the Philippines, however, extending financial assistance to displaced workers has limits. Unlike the economic powerhouses of the US, Japan and a few European countries, the Philippines cannot afford to give away the precious revenues it is earning from tax collections without sacrificing the needs of the health and education sectors. Manila also needs revenues to finance an ambitious infrastructure program aimed at creating jobs, solving gridlocks and opening up the urban markets to farmers and fishermen in the countryside.
The IMF, for instance, favors governments taking equity in troubled or insolvent companies or extending grants in exchange for higher tax rates later to save jobs. But it cautioned governments on allocating scarce resources, noting that some firms will unavoidably flounder, like those in the travel industry, in a post-pandemic environment.
Strict social distancing rules to contain the spread of COVID-19 have prevented the Philippines from fully reopening the local economy. They have restricted mall and hotel activities, and limited the operations of trains, buses, jeepneys and airlines. The travel restrictions and the reduced number of transportation fleets available to office, restaurant and mall workers have pushed back the country's economic rebound.
But the government should pursue a wider reopening of the economy pending the arrival of the vaccine. It is the preferred option because subsidies and dole-outs will stretch the resources of the state. They do not guarantee economic productivity and they do not certainly create additional jobs.
