THE government is expected to record a wider budget deficit of 3.6 percent of GDP this year—breaching its target of 3.2 percent of GDP—as it is seen to lose as much as P91 billion in revenue collections due to coronavirus outbreak if it drags on until the middle of this year, Finance Secretary Carlos G. Dominguez III said.
In a press conference on Tuesday following the Economic Development Cluster (EDC) meeting, Dominguez was quick to allay fears, though, that this would lead to a credit rating downgrade. He said the foreseen wider budget deficit-to-GDP ratio is “financeable” as such would be funded through a corresponding increase in the government’s borrowing level.
“Assuming that the COVID-19 induced disruptions last until after the middle of the year, the total revenue collections are expected to drop by around P91 billion. The budget deficit could breach the 2020 program of 3.2 percent of GDP to around 3.6 percent. The corresponding increase in the borrowing level will provide financing for the increased deficit. Our credit rating is quite robust and we don’t expect any difficulty in covering a potential deficit that might occur because of the expected drop in economic activity because of this COVID,” he said.
On Tuesday, the Department of Health reported a total number of 33 cases.
Lower rates
Dominguez said it would not be difficult for the government to finance the increased deficit as there is a drop in interest rates.
“As I mentioned, our total estimated drop in revenues is around P91 billion, let’s say a hundred billion. Our total budget is P4.1 trillion. Our borrowing, it’s very easy for us to fund a hundred billion to cover a budget shortfall. It’s not difficult at all. That is $2 billion,” he said.
Despite the projected impact on growth and revenue collections, the finance chief assured the public that the country is not in a “worrisome situation” as the government will still go “full blast” on the “Build, Build, Build” program, as well as its other initiatives.
“We assure you that we have enough in our tool kit to make sure that our expenditures are going to remain at what the planned levels are, in spite of the fact that we might get a hit on our growth and revenues because of this COVID. So it’s not a worrisome situation, we are not teetering on the brink of anything, we are very comfortable,” he said.
Dominguez also said the EDC recommended the approval of P2.92-billion additional funding for COVID-19 responses of the Department of Health—for additional testing, augmentation of contact tracing, surveillance and additional personnel protective equipment for health workers at the national and local levels.
This will also fund isolation packages for patients who will be admitted for COVID-19 which will be covered by Philippine Health Corp.
The government will be sourcing the P2.92 billion additional funding mostly from local sources.
“The interest rates are actually moving in favor of ourselves, the borrowers, and that bodes well for our borrowing program. As of now, we see the stimulus program as being just keeping our expenditure budget where it is despite the fact that our revenues are going down, so that in itself is already stimulus package,” he said. “That’s another P90 billion we are going to pump into the economy so we are maintaining our ship on a steady keel and we are keeping the speed at what can we handle.”
DTI, DOT response
Other government agencies also outlined their mitigation measures in response to the coronavirus outbreak.
For his part, Trade Secretary Ramon Lopez said they have started to provide assistance to firms on getting alternative suppliers. He said the department is also working on diversifying export markets while looking into nontraditional products and into providing logistics support to provide ease of movement of people and cargo.
Should the situation worsen or the impact of the virus be prolonged, Lopez said they are also looking at giving regulatory relief to firms like deferred payments on bank loans or lowering of interest and waiving of fees, among others.
“So these are things that we will look at in the future,” he said.
In addition, the Department of Tourism (DOT) said it will allocate P6 billion to be spent on environmental cleanups, including the country’s beaches, infrastructure and regional tourism development in a bid to boost the partnership between the government and the private sector to help domestic tourism.
Tourism Assistant Secretary Roberto Alabado III said they have allocated funds for resilient infrastructure development, mainly for financing sewage treatment plants for Coron as well as in Puerto Galera.
Image credits: Nonie Reyes
