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Economic stimulus to MSMEs

Flor G. Tarriela

Flor G. Tarriela

The Community Quarantine (Enhanced, Modified Enhanced and General) will end May 31.
Will it be extended again or be lifted? And even if the quarantine is lifted, things won’t be the same again. No more “beso beso”, greetings or handshake. We will wash our hands frequently, bring alcohol with us, wear a mask and be wary of anyone coughing. Some of us will stay home unless going out is a must do.

Prof. Dick Vietor, Senior Associate Dean for the Asian Initiative of Harvard Business School in his May 15 talk to the Harvard Business School Club of the Philippines on “Pandemonium C0VID-19 World” showed its negative global impact as it affected global supply chains, trade and travel. Economic contraction, global growth down with increasing fiscal deficit and debt levels /GDP of affected countries. US government debt/GDP ratiopre-COVID outbreak was at 81% going up to 101% with prelim update then already at 108%. France ,Spain and Italy with high tourism receipts are very hard-hit. He also showed China’s trade, industrial production and GDP going down. On 2020 growth projections, global economy will be negative growth (-3%) with advanced economies having more severe impact (-6%) than emerging markets and developing countries at (-1%).

In the home front, this health crises severely affected the Philippine economy. The 2020 GDP pre-COVID forecast of 6.5% is now down to -2.5% with 1st quarter GDP showing -0.2% despite the quarantine only impacted for half a month in March. When will COVID-19 end? And how will the recovery look like? Will the recovery take the U shape, V, W, or long U shape? Well, no one knows. Fortunately, the Philippines has strong fundamentals to weather this passing storm and has the four (4) pillar socio-economic strategy. Thanks to our strong economic team, The Economist ranks the Philippines 6th among selected emerging economies in the world and the best among those ranked from SE Asia, in terms of economic, fiscal, and financial management.

The Philippine Economic Stimulus ACT (PESA) bill is sponsored by three (3) very able congressmen: Joey Salceda, Stella Quimbo and Sharon Garin. The bill is to provide economic stimulus against the adverse effect of COVID-19 which resulted to low economic activity.

The PESA bill aims to support four sectors to spur up the economy:

Households through the Bayanihan Law, wage subsidies and massive testing etc. The Intent is to restore workers’ income and create consumers demand.

Banks and Financial Institutions – through regulatory reliefs, cuts in reserve requirement, relaxa-tion of regulations as well as the revival of the Special Purpose Vehicle Law.

Government with the flagship projects (P650 billion) and enhanced Build Build Build (P650 billion)

To provide liquidity and prevent insolvency for Small /Medium and Corporates, here’s the potential help being discussed to be given:

For MSME (micro,small and medium entreprises):

– Trainings, credit and refinancing facilities P10 billion via Department of Trade and Industry (DTI);

-SB Corp special programs specifically for SMEs P25 billion in 2020 and P50 billion in 2021;

– Zero (O) interest rate loans via Land Bank / DBP P50 billion in 2020 and P50 billion in 2021;

For Tourism: Incentives, loans, grants and training via Department of Tourism: P58 billion;,

For Import /Export Industries: Grants, trainings and loans via Board of Investments: P44 billion;
For transport industries: Grants, credit facility, loan guarantees, fees and fund reliefs via DOTr: P48 billion;

Loan guarantees will also be available through the Philippine Guarantee Fund with an allocation of P25 billion in 2020 and an additional P50 billion in 2021. The National Development Corporation (NDC) will also bail out firms from going bankrupt through the purchase of equity and take-over of firms with an allocation of P25 billion targeted equity support to match bank lending with conditions.

The PESA Bill currently deliberated in Congress is expected to be passed soon. What’s important is for companies to monitor the developments as to the final outcome to find out the requirements, the rules and regulations and apply soonest. Hopefully companies can avail of the government stimulus to be able to operate soonest and start the economy going again.

On a personal note, aside from the virtual meetings /conferences, ordering our groceries and supplies online etc, I’m following DA Secretary William Dar’s “Plant Plant Plant”. Now transforming our home garden to a “Hardin ng Buhay“ with edible and medicinal plants. Do you know that in one square meter you can actually grow 16 different plants? I’m also growing fresh air, plants like the Snake plant or “mother-in-laws tongue” which produces oxygen and removes carbon dioxide at night making it ideal for bedrooms. Try gardening, its therapeutic and keeps stress away during this long staycation. An added benefit is contented husband Ed who loves fresh camote tops, talinum and alugbati for salad.

Life is short. Let’s do the right thing right. This will pass. Hope we listen and learn what God is teaching us . God is in control!

****

Ms. Tarriela is the Chairman of PNB. She is a director of Bankers Association of the Philippines (BAP) and of FINEX Foundation. She is former Undersecretary of Finance and the first Filipina Vice President of Citibank N.A.

ftarriela@yahoo.com


Source: Manila Bulletin (https://business.mb.com.ph/2020/05/27/economic-stimulus-to-msmes/)

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