THE Philippine government is in talks with multilateral agencies to secure up to $2-billion funding support as the state expects foregone revenue of as much as P318.9 billion should the economy contract by 1 percent this year due to the pandemic.
Finance Secretary Carlos G. Dominguez III said on Wednesday the government hopes to secure “soon” the funds, to come in the form of both grants and loans.
The money, he said, will also be spent to support people who lost their livelihood, boost government’s capacity to combat the virus, as well as to protect the country’s frontliners.
“We are currently in negotiations with multilateral agencies for $1 billion up to $2 billion for funding support for this. We have to realize, we are looking at a drop in revenues. So we have to cover that gap somehow so that we maintain our pace of spending,” Dominguez told reporters via teleconference.
“So we are talking to multilateral agencies at the moment to do that. We want to do it early because all the countries in the world are trying to do the same thing,” he added.
He said these multilateral agencies include the World Bank, the Asian Development Bank (ADB), as well as the Asian Infrastructure Investment Bank (AIIB).
Aside from multilateral agencies, the government is talking to bilateral development partners while keeping in mind that other countries are also addressing their own domestic situations, the DOF chief said.
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.
Based on the initial estimates of the National Economic and 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.
“Those are roughly the numbers, but at this point in time, we don’t even have a very good estimate of what the GDP is going to look like. According to the Neda, it can be -0.66 percent to +4.3 percent. For sure, almost sure, the revenues from fuel will be down by about P14 billion because of a combination of drop in demand and drop in prices,” Dominguez said.
Neda Undersecretary for Policy and Planning Rosemarie G. Edillon earlier told the BusinessMirror a recession is possible for the Philippines although she said they are working for a positive growth.
The last time GDP contracted was in 1998 and 1991 when full-year GDP both contracted 0.6 percent. Prior to those years, the last time GDP contracted was in 1984 and 1985 at 7.3 percent.
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.
However, Dominguez said he is looking at around 4 percent projected deficit ceiling, higher than their initial estimate deficit of 3.6 percent of GDP. In 2019 the government posted a record deficit of P660.2 billion or 3.55 percent of GDP as expenditures outpaced revenues.
“Well, I don’t want to give any specific numbers right now because I don’t know how low the tax collections will go. I don’t know how much more exactly we will spend. But certainly, close to probably a little more than 4 percent would be a reasonable number right now. But I don’t want to do that prediction,” he said.
Dominguez also said in a separate interview with Bloomberg on Wednesday that their main concern has now shifted to the survival of the people and supporting the general economy and no longer the opinion of credit rating agencies.
“Well, I guess, the coronavirus changed all that. We understand the concerns of the credit rating agencies but, again, I suppose we are not the only ones in this boat. I think practically the whole world is facing the same problems that we do,” he said.
While he said the road to A credit rating remains to be the goal, he told reporters they needed to prioritize how to get through this “landslide.”
He explained: “You are like going on the road and then you had a landslide. Okay? We will still go on that road but we have to dig our way around or go around this landslide so in the meantime the priority is not the goal but how to get through this landslide that blocked our way.”