Finance Secretary Carlos G. Dominguez III told reporters that the stimulus package is not the government’s priority right now even after business groups called on the government to release a stimulus package to help businesses cope with the pandemic.
Other countries have either unveiled or are already working on their respective stimulus packages to support their economy and cushion the economic impact caused by the pandemic.
“As I said our priority now is support the people who have lost their daily livelihood. Number two, protect the people who are the frontliners and expand our capacity to deal with this on a physical basis and to provide liquidity to the economy. I have told the people who had come out with that proposal to do a stimulus package. That is not our priority at the moment,” Dominguez said in an interview via Google Meet.
Dominguez stressed he does not see the point of rolling out a stimulus package as well as tax credits at the moment while the government is still trying to contain the spread of the virus through imposing an enhanced community quarantine in the entire Luzon.
“What is required right now is the ability of the government to move funds around to meet the new imperatives. You know this stimulus package we don’t even know what’s the point of giving tax credits and giving stimulus package now when you have no workers? What’s the point? The workers are in quarantine. We want them to be on quarantine so that the disease doesn’t spread. Let’s talk about that later,” he added.
On Monday, different business groups suggested that the government provide rehabilitation, special financing programs and or “stimulus package to help businesses, especially MSMEs that are affected by the pandemic.
They also appealed to the government to help them pay workers who remain quarantined and to rehire and resume normal operations when the pandemic is under control.
The statement was signed by 32 business groups, including the Philippine Chamber of Commerce and Industry, Management Association of the Philippines, Makati Business Club and the Joint Foreign Chambers of the Philippines.
In its earlier statement, the business groups also urged the government to adopt a “fiscal stimulus program” that will raise the country’s deficit-to-GDP ratio to close to 5 percent, “which is a usual red flag for credit watchers”, noting that they will relax considering the unprecedented number of countries reeling from the economic impact of the virus.
“Assuming GDP growth slows to 4.5 percent (GDP: 20.0 trillion), a 5 percent deficit will be P1 trillion. Subtract the programmed deficit of 3.6% (P720 billion), and there is room for a P281 billion fiscal stimulus program,” read the statement. “Assuming GDP growth slows to 3 percent (GDP: 19.7 trillion), a 5 percent deficit will be 987.5 billion. Subtract the programmed deficit of 3.6% (P711.3 billion), and there will be room for a P277 billion fiscal stimulus program.”
Despite calling the Department of Finance’s P27.1 billion package a “great start”, the business groups said in the same statement that the response should still include “funds to support businesses, especially MSMEs.”
Based on the initial estimates of the National Economic Development Authority (Neda), the country’s economy could contract 0.6 percent this year. It could also slow to a growth of 4.3 percent.
The estimate was based on the initial days of the lockdown imposed to contain the spread of COVID-19.
According to Neda, the country’s budget deficit could also widen to 4.4 percent to 5.4 percent of GDP in 2020, assuming the same revenue effort.
Economic managers have also projected a revenue loss of P286.4 billion should the country record a zero percent growth this year while a contraction of 1 percent would yield a P318.9 billion drop in revenues.
The Philippine government is already in talks with multilateral agencies to secure up to $2 billion funding support to cover the expected foregone revenue.
Image credits: AP/Wong Maye-E