An economist of ING Bank Manila discounts a negative output for the country’s economy as a result of the coronavirus disease 2019 pandemic this year, but said government spending is the key to ensure its revival.
In a report dated April 13, ING Bank Manila senior economist Nicholas Mapa said it would be crucial for the government to “hold the fort while the rest of the economic squad is in sick bay”.
“But once the whole squad is reassembled and Covid-19 is beaten, we can expect a strong recovery to get the Philippines back to where it belongs,”Mapa said.
Economic managers said the country’s gross domestic product is expected to be zero, or may decline as much as 1 percent this year because of the impact of Covid-19.
This is a big drop from the 5.9-percent economic output last year and the six percent level in recent years.
Mapa said recovery of the domestic economy would rely significantly on government spending because this would counter the income lost by the private sector.
Finance Secretary Carlos Dominguez III said the government has formulated a P1.1 trillion worth of fiscal and monetary measures to help Filipinos and the economy fight the impact of the pandemic.
Part of these measures are the P300 billion that the Bangko Sentral has extended to the national government through a repurchase agreement for government securities that would be redeemed at the maximum period of six months.
The BSP has also reduced its key policy rates by a total of 75 basis points this year alone while another 25 basis points cut was made last year.
It has also reduced the reserve requirement ratio of universal and commercial banks by 200 basis points to encourage banks to lend more to businesses and households.
Aside from these, the government has directed financial institutions as well as government agencies extending loans to provide leeway on payments due within the quarantine period around the country.
Poor households and those belonging to the vulnerable sector will also be given about P5,000 to P8,000 cash aid from April to May to alleviate their lives during the quarantine period.
Mapa said the scale and scope of response from the government front would determine the trajectory of GDP in 2020.
He said “monetary policy has done its part to provide all the tools and atmosphere for a stable recovery by fostering lending activity even after the ECQ (enhanced community quarantine), now it’s up to (the) government to spend to get the wheels of the economy moving again.”
“Although the outlook appears dire, we don’t think the Philippines will post negative growth just yet but it will be quite a dive,” he added.