More fiscal measures to cushion Covid-19 impact

March 22, 2020

An economist of ING Bank Manila said more fiscal measures are needed even after the Bangko Sentral announced monetary stimulus that will take effect on Friday.

In a research not, ING senior economist Nicholas Mapa said the 50-basis-point slash in the BSP’s key rates would be a “great help” to lift the domestic economy as more challenges come out given the global pandemic caused by the coronavirus disease 2019.

Mapa said the liquidity boost that the BSP announced by relaxing its regulations on compliance reporting by banks, calculation of penalties on required reserves, and single borrowers limit, “will help keep banks and, in turn, business afloat”.

“The monetary authorities did the right thing to help shore up investor confidence as well as provide the life blood to keep the patient, the Philippine economy, running while the Filipinos remain on quarantine to fight the menace that is Covid-19,” he said.

Recently, the Department of Finance said the government is allocating P27 billion, sourced from various government agencies, to address the impact of Covid-19 on the economy.

However, Mapa said this stimulus package amounts to about 0.1 percent of domestic output and “as such, looks extremely meager in the face of the rampaging pathogen”.

He said the enhanced community quarantine in Luzon from March 17 to April 12, 2020 would have a  big impact on the economy given that economic share of the country’s largest island is about 74 percent of gross domestic product.

“The problem faced by the Philippines is mountain-sized, we will need a mountain-sized response,” he said.

Mapa said the drop in domestic interest rates “would do little to ignite loan demand given that more than half of the workforce is holed up in their homes given strict curfews and restrictions for movement”.

“The ball is in the court of the fiscal side as the BSP, corporations and even individuals (are) bravely stepping in to face the menace that is Covid-19,” he added. 

Mapa said a stimulus package would “clearly not cut it” as other economies roll out spending bills as high as 9 percent of GDP “to keep their countries alive for just a little longer.”

“Long boasting a healthy fiscal sector, let’s hope the government will not be shy or hesitate in using all of its fiscal space and then some,” he added.

Mapa said House Bill 6606, which proposes a P108-billion stimulus package to counter the economic impact of Covid-19, may be revised to have a higher figure and more impact to boost the economy.