By Katrina Elaine Alba and Chenny Ramos
(July 31, 2020) – The Philippine economy has started to bounce back after two quarters of contraction, the finance secretary has said as he supported moves to further ease restrictions and allow more businesses to reopen despite the uncontrolled spike in coronavirus cases
In a meeting Thursday night with the president, Carlos “Sonny” Dominguez III said the government has enough funds to raise about 20 billion pesos to buy at least 40 million doses of a potential COVID-19 vaccine by December.
“The economy is actually beginning to recover,” Dominguez, who had also served as agriculture secretary in the past administration under Fidel Ramos. The president’s meeting was shown on national television only on Friday.
“We already hit the lowest part, which was April-May. Yun ang pinakamababa as we can see, it’s already picking up now.”
The government’s economic managers said they expected a big rebound next year, with the economy growing between 7.1 percent and 8.1 percent, supported by an economic recovery programme to cushion the impact of the pandemic.
The Philippines, which had been one of Asia’s fastest-growing economies before the pandemic, is on the edge of a recession after growth unexpectedly shrank 0.2 percent in the first quarter, dashing forecasts for 3.1 percent growth.
The gross domestic product was expected to decline 2 percent to 3.4 percent this year, worse than the government’s forecast of -1.0 percent to 0.0 percent growth in March.
This year’s budget deficit was estimated to reach 1.56 trillion pesos or 8.1 percent of GDP, a far bigger shortfall than the government’s 5.3 percent forecast in March, and more than double its original estimate of 3.2 percent.
Government’s outstanding debt has also ballooned to 9.054 trillion pesos by the end of June 2020, compared to the 7.86-trillion peso for the same period last year.
The Bureau of Treasury said the government borrowed heavily from domestic lenders amounting to 6.19-trillion pesos or 68 percent.
External debt has reached 2.86-trillion pesos, or 32 percent.
About $7.78 billion of 380 billion pesos were used in the pandemic response,
“Wala ho tayong problema sa liquidity. The economy is not short of money,” Dominguez said, “Ang peso ho natin is the strongest in Asia. The strongest currency in Asia, stronger than the Japanese yen.”
The Asian Development Bank (ADB) has projected a deeper decline in the Philippine’s growth could contract by as much as 5.3 percent this year.
But Dominguez was more upbeat, citing credit agency Moody’s affirmation of “Baa2” rating and “stable” outlook for the Philippines.
“People have faith in us, we are able to finance by borrowing locally and internally. We are in good shape to overcome this crisis,” he said on Friday.
BURDEN DEBT ON FILIPINOS
Some have noted the 9-trillion peso debt would mean that each Filipino’s share of the burden would be 83,239 pesos.
But an economic expert told News5 this was no cause for concern.
“Ang kailangan tignan ay may kakayanan tayo bilang isang bansa, hindi bilang isang indibidwal, yung buong ekonomiya,” said Filomeno Sta. Ana III, co-founder and coordinator of think thank Action for Economic Reforms (AER).
While Sta. Ana said the public would be paying the debt through their taxes, he said the focus should not be on the individual’s capacity to pay that amount.
Some of the indicators of a country’s ability to pay its debts are its debt service ratio and debt-to-GDP (Gross Domestic Product) ratio.
The country’s ratio of debt service burden to exports of goods and receipts of services increased from 5.7 to 8.9 percent for January to March 2020.
As for the country’s debt-to-GDP ratio, Dominguez said in a pre-State of the Nation Address (SONA) forum in early July that they “managed to bring down our debt-to-GDP ratio to a historic low of 39.6 percent.”
But with the growing debt to finance the Philippines’ COVID-19 response, the finance department said they would aim to keep the debt below 50 percent.
He also said that the deficit-to GDP ratio would likely more than double as tax collections drop and the government would spend more in its coronavirus response.
Sta. Ana though, believes this would not go as low as previous financial crises in Asia.
“We should not worry over a debt crisis. We are far from having a debt crisis,” he said. (MM)
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