Lowering the Number of Jobless is a Priority
We expected the discouraging April unemployment figures given the lockdown imposed across the Philippines from March until now. The data simply stresses the need to reopen the economy further, but with caution.
We owe the workers their jobs. They persevered during the lockdown period despite meager resources, and strictly followed health protocols as their contribution to stopping the spread of Covid-19 in the Philippines.
The unemployment rate rose to a record 17.7 percent in April, translating into 7.3 million jobless Filipinos and topping the 10.3-percent rate during the 1998 recession. The jobless data highlights the urgency to resume many economic activities that were disrupted by harsh quarantine rules. The lockdown severely restricted the movement of the people and the delivery of goods all over the country.
Labor Secretary Silvestre Bello III noted that the lockdown in the two months of April and May was the period for job-hunting by fresh graduates. It is around this period when those coming from the universities and technical institutes boost the ranks of the labor force. Unfortunately, these job seekers failed to join the labor force as at least two-thirds of the economy is shut down.
The partial and eventually the full reopening of the economy, especially the services sector, is key to recovery. Millions are employed in fast-food restaurants, hotels, business-process outsourcing companies and malls, to name a few. This sector fuels consumption, one of the strong features of the economy. But with most of them unable to work, the unemployment situation worsened.
We also must not lose sight of the government’s infrastructure program. It directly creates employment and will be critical in restoring jobs in the construction sector.
The enhanced community quarantine that prevailed since March and up to the end of April forced many small businesses to temporarily shut down. Consequently, millions of workers were unable to work, compounding the unemployment problem.
We have to restore the jobs lost by our workers at the height of the pandemic in order to preserve past economic gains and the country’s solid macroeconomic fundamentals.
These fundamentals include a healthy balance of payments position, lower inflation and interest rates, high gross international reserves, a stable banking sector and a manageable external debt balance at 22.2 percent of the gross domestic product as of end-2019.
The country’s international reserves rose to an all-time high of $90.94 billion at the end of April from $88.8 billion in March, while the BOP yielded a surplus of $1.6 billion in the first four months of the year.
These solid economic indicators are the main reasons why foreign rating agencies still believe in the growth story of the Philippines.
Just last week, Japan Credit Rating Agency upgraded the Philippines’s credit rating by a notch from BBB+ to A-. It cited the country’s resilience despite the economic contraction in the first quarter of 2020. JCR assigned a “stable” outlook on the new rating, which means the “A-” will likely be maintained over the near term period.
I am pleased to note that reputable rating agencies still regard the
Philippines highly despite the economic contraction. JCR raised the Philippines’s credit rating on its belief that the impact of the Covid-19 crisis on the domestic economy and the government’s fiscal standing would be temporary.
Like other reputable global financial institutions, JCR noted the country’s strong fundamentals given the health crisis and the massive relief measures being put in place by the Duterte administration.
“JCR holds that a downturn will be limited given the country’s strengthened economic base, resilient external position, and the government’s economic stimulus package totaling more than 9 percent of GDP. JCR also considers that the fiscal soundness will not be impaired because while the fiscal deficit may widen, the package at this time is justifiable and the government debt will remain comparatively subdued,” says JCR.
The Japanese agency believes the Philippine economy will bounce back with a growth of between 6 percent and 7 percent in the medium term following the expected contraction this year.
I share the same optimism. But first, we have to fix the high unemployment rate recorded in April. Restoring and creating jobs through a phased reopening of the economy will get us over the hump.