Credit consciousness key to economic recovery (Sabong News)
Author
Manila Bulletin
Date
APRIL 25 2022
“Wastong pag-utang, susi sa pagbangon ng bayan” (Proper borrowing, key to people’s recovery) is the theme of this year’s observance of Credit Consciousness Week — a practice that began in the last week of April 1995 with the issuance by then President Fidel V. Ramos of Proclamation No. 568.
As noted by S&P Global: “The Philippine economy suffered a deep recession in 2020 due to the impact of the Covid-19 pandemic, with GDP contracting by 9.6% year-on-year. This was the largest annual decline ever recorded since National Accounts data series for the Philippines commenced in 1946.”
The onslaught of the coronavirus pandemic impelled the government to resort to borrowings and grants starting in March 2020, pushing the country’s debt-to-GDP ratio to 60.5 percent by 2021, or just slightly above the international threshold of 60 percent. While the country has maintained its investment grade rating and kept its good credit standing in the global financial markets, Finance Secretary Carlos Dominguez III has pointed out that the next President will have to come to grips with the debt burden if the Philippine economy is to attain full recovery.
This is the context in which the call has been sounded for proper borrowing and the judicious use of credit by companies, households and individuals.
Credit consciousness involves an understanding of the basics of borrowing. The debts incurred to ensure an effective response to Covid were obtained from both foreign and domestic sources. Domestic debt includes the issuance of securities, like treasury bonds and treasury bills, as well as short-term loans from the Bangko Sentral ng Pilipinas (BSP). It is owed to citizens; hence, the money stays within the economy.
Yet, the harsh reality is that the pandemic displaced tens of thousands who lost their jobs during the alternating episodes of quarantine and lockdown. Many micro-, small-, and medium-scale enterprises were forced to shut down. Thus, it is also imperative that credit assistance be funneled to this sector so that more people could be put to work as the pace of economic activity accelerates.
Buoyed by the steep decline in Covid infections, households are also looking at being able to invest anew in home repair, appliances, family cars and consumer durables — all of which are likely to involve the use of credit facilities. Reckless spending could lead to an enduring stigma of indebtedness. It is well to plan ahead and take stock of ability to repay as these are vital keys to ensuring that credit is properly used.
Banks and credit card companies should also continually foster the responsible use of credit and proper borrowing habits. By helping foster good borrowing practices, they could broaden their base of customers.
More robust consumer spending leads to healthier companies that offer better goods and services. They contribute to the recovery, growth and expansion of the country’s economy.
