By Corina Oliquino
MANILA — Bank of China Manila country head Deng Jun believes the Chinese economy’s recovery in the second quarter of 2020 with a gross domestic product (GDP) growth of 3.2 percent after contracting 6.8 in percent the first quarter due to the COVID-19 pandemic is a “positive indication for all other countries on the road to recovery.”
Deng said the Philippine economy’s recovery could last through the first half of 2021, noting the country ranked first in Southeast Asia in terms of growth rate of renminbi (RMB or the Chinese currency Yuan in international context) clearing volume as of the end of June and ahead of countries like Singapore, Indonesia and Malaysia.
The Philippines ranks as the twenty-second largest RMB clearer among 46 countries and regions around the world, according to data from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network following a total volume of RMB cleared in the Philippines that spiked to 138 percent to 302.51 billion Chinese yuan.
Deng said the growth could be attributed to the increased awareness about the benefits of using RMB as a settlement and payment currency between China and the Philippines
“More and more enterprises are finding that direct conversion of RMB to peso, instead of converting it first to US dollar, can help save on friction costs and hedge foreign exchange exposure risks,” Deng said.
The Development Budget Coordination Committee, on the other hand, sees the economy rebounding next year with a GDP growth rate of eight to nine percent after it contracted 0.2 percent in the first quarter following the enforcement of the enhanced community quarantine in the middle of March to slow the spread of COVID-19.
Economic managers forecast a GDP contraction of two to 3.4 percent this year, ending more than two decades of positive growth since the 0.5 percent contraction in 1998 due to the Asian financial crisis.
In a report by The Philippine Star, Bank of China Manila is the “officially designated RMB clearing bank for the Philippines and a member of the Philippine RMB Trading Community (PRTC), a community of 14 banks with a mission of promoting direct peso-yuan exchange.”
“Our confidence in the continuous growth in RMB clearing volume comes from the increasing trade volume between China and the Philippines. There are many upcoming investments from China to the Philippines that will be cleared in RMB and we will continue to promote RMB as a payment and settlement currency for the trade and investment activities between the two countries by highlighting it as an efficient and cost-saving payment currency,” Deng said, reiterating the bank’s optimism about the future of RMB in the Philippines despite the economic slowdown caused by the coronavirus pandemic globally.
COVID response and its impact to the economy
In another report by Rappler, the Philippines ranks fourth among countries with the smallest coronavirus economic response in terms of share of GDP.
Data from the Asian Development Bank’s (ADB) COVID-19 Policy Database found the “per capita distribution of the total coronavirus packages launched by the Philippine government ($197) so far also trails behind smaller Southeast Asian economies, such as Brunei ($742) and Timor-Leste ($200).”
Non-profit think tank IBON Foundation’s Executive Director Sonny Africa, on a phone interview with Rappler on July 23, said the government is still not spending enough to revive the economy.
“(The government) really has to spend amid the worst economic crisis and decline in Philippine history. The government has to step in to spend but it’s really not spending,” Africa said, noting the current position of the government reflect its apprehension about spending and “too much regard for creditworthiness.”
“Truth be told, there’s no stimulus happening. We are really in an austerity mode. In a time when both the local and global economies are crashing, when the only institution you have that has the resources to intervene chooses not to intervene, it’s a huge sin of omission,” Africa added, pointing out that countries such as Indonesia and Vietnam both have lower credit ratings than the Philippines but spent more on their COVID responses.
“Our neighboring countries who aren’t bragging that much about (creditworthiness), they’re actually doing more to help their people and their economy,” Africa said.
The ADB’s COVID-19 Policy Database also indicated that the Philippines has allocated an estimated ₱1.07 trillion, or an equivalent of about 5.9 percent of the country’s GDP, for its economic response to the pandemic since July 13.
Almost half of the amount or ₱523 billion (48 percent) went to the government’s support for the income of households, businesses and local governments while ₱464.4 billion went to non-health-related measures including emergency subsidy program for low-income families and the wage subsidy program for micro, small and medium enterprises (MSMEs).
The remaining ₱58.6 billion went to health-related support including the purchase of medical supplies and assistance to health workers and COVID-19 patients.
As of July 27, the Philippines logged 1,657 new COVID-19 cases bringing the total number to 82,040, with 16 deaths and 359 recoveries.