DESPITE the economy officially falling into recession and the likelihood that it would be recording its worst decline in more than three decades, the government is still sticking to its plan to roll out as much as P180 billion in stimulus package this year.
Finance Secretary Carlos G. Dominguez III insisted on Thursday that the country’s stimulus package must be “affordable,” especially since the Covid-19 virus may not be defeated by the end of this year.
He also said he hopes that the Bayanihan To Recover As One Act (Bayanihan II) would finally be passed by next week.
“As they say, we need to keep our powder dry for next year as well,” Dominguez said in a virtual press conference with the Development Budget Coordination Committee (DBCC).
Of the P180 billion, Dominguez said P140 billion will be spent for the stimulus package while the remaining P40 billion will account for the expected forgone revenues from the 5-percent immediate reduction in the corporate income tax rate from the 30 percent to 25 percent under the proposed Corporate Recovery and Tax Incentives for Enterprises or CREATE bill.
“Now this number is arrived at to keep our fiscal deficit in a manageable zone,” he said.
This, as the DBCC also revised upward its deficit targets over the medium term for 2020 until 2022 on the back of expected lower revenues and higher disbursements amid the Covid-19 pandemic.
A budget deficit occurs when expenditures exceed revenues.
From only 8.4 percent of GDP this year, the DBCC’s new deficit target was hiked to 9.6 percent of GDP.
Deficit targets were also revised upward to 8.5 percent in 2021 and 7.2 percent in 2022 from earlier projections of 6.6 percent and 5 percent, respectively.
Borrowing program
Dominguez also told reporters they expect to borrow roughly P3 trillion next year, which he said would be the same amount this year.
The country’s finance chief said, however, they see the borrowing program to be reduced to P2.3 trillion by 2022.
He also believes additional borrowings as well as state tax revenues would be sufficient to support the proposed P4.5-trillion national budget for next year.
For July, Dominguez said both Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) exceeded their respective collection goals.
Based on preliminary data, Dominguez said BIR’s revenue take for the month reached P126.72 billion, up by 2.08 percent from its revised target of P124.14 billion.
On the other hand, BOC surpassed its goal by 5.03 percent when it collected P50.07 billion against its target of P47.67 billion.
This, he said, signals rising economic activity with the gradual reopening of the economy.
Bernadette D. Nicolas
Image credits: Roy Domingo