MANILA, Philippines – The Philippines is predicting to go into recession as the economy contracts due to the coronavirus epidemic and associated blockages.
Finance Secretary Carlos Dominguez III said in the late evening speech by President Rodrigo Duterte and key cabinet members on Thursday, April 9: “Ngayon, COVID-19 hit us very hard. Ang katotohan lang, estimating that the growth of our GDP (gross domestic product) will be 0% or -1%.” (Now this COVID-19 hit us very hard. To be fair, our estimated GDP growth will be 0% to -1%.)
Dominguez’s latest estimate is bleaker than the Asian Development Bank’s outlook for the Philippines, which GDP growth of 2% full year. The World Bank forecasts were even optimistic at 3%.
However, this is a downward shift for the Philippine economy which set itself a target of GDP growth of 6.5% to 7.5% for 2020. (READ: Coronavirus is expected to make the Philippines miss 2020 GDP growth target)
The governor of Bangko Sentral ng des Pilipinas, Benjamin Diokno, called this slide a “technical recession” CNN Philippines interview, where the country will experience an economic contraction due to two quarters of negative growth.
Loans, Loans, Loans
Dominguez also said the budget deficit would drop from the 3.2% target to 5.3%, with the Philippines looking for loans to finance the coronavirus war chest. (READ: What we know so far: Fund the fight against coronavirus)
Economic managers aim to increase P1.17 trillion, around 5 to 6% of GDP, for measures against coronaviruses. This will bring the country’s debt-to-GDP ratio to 47%, down from 41.5% last year, said Dominguez.
“We will continually borrow more money to support the Philippine economy and fight COVID-19. Right now, we are calling on our friends from the AfDB and the World Bank and we will borrow about 5.6 billion If that’s not enough, we will go to the commercial market, “said Dominguez in a mixture of English and FIlipino.
The CFO downplayed the government’s cash flow problem, saying it is still manageable. “Our economic position is doing well, although we are not fortunate to have this COVID-19, we are very well prepared,” said Dominguez.
“Our credit rating is high, it went to BBB +, the highest of all time. We are therefore convinced that we have the financial capacity to solve this problem that this COVID-19 brought us. We therefore want to ensure to our citizens that we have the money, “he said. (EXPLANATOR: What is there for us if the PH has a good credit rating?)
But he warned against unnecessary spending: “We must also realize that money is not infinite, so we must spend it properly, not for unnecessary spending.”
Dominguez said the coronavirus war chest gives priority to helping poor families. It will be followed by support for small and medium-sized enterprises, then support for businesses.
In the same briefing, Duterte stated that he sell government assets as a last resort to generate funds and repay loans. – Rappler.com