Finance Secretary Carlos Dominguez III has said the Philippines is “financially able” to meet the unexpected challenges to the Filipino people and the domestic economy of the 2019 coronavirus disease (COVID-19) pandemic owing to President Rodrigo Duterte’s policies since the beginning of his term of maintaining fiscal discipline and exercising prudence in state spending.
These conservative economic policies has enabled the government to mobilize P1.17 trillion-worth of fiscal and monetary measures to date to help defeat the highly contagious COVID-19 and provide relief to the poor and other sectors reeling from this pandemic’s economic hit, Dominguez said during the President’s televised briefing early Thursday last week.
The President’s judicious spending policies have kept the country’s macroeconomic fundamentals strong, with gross domestic product (GDP) growth averaging 6.4 percent since he assumed office in 2016, Dominguez noted.
The government’s revenue effort or collection from taxes and other sources reached 16.9 percent in 2019, which is the highest in 22 years, Dominguez added.
Dominguez said the Philippines has also maintained a manageable debt-to-GDP ratio of 41.5 percent in 2019, which is a vast improvement from the 70 percent in the past.
The Philippines’ 2019 debt-to-GDP ratio is also very low compared to other economies in the region, where one country’s debt has crept past 80 percent of its GDP, he added.
Inflation has also remained low at 2.5 percent in March, which is within the 2020 target of 2 to 4 percent, Dominguez noted.
“Nung pumasok kayo (President Duterte) nung 2016, ang order nyo ho sa amin is to manage the economy for the welfare of the Filipino people. Ang ibig sabihin nun, lahat ng collection natin ng taxes should be collected efficiently at lahat ng gastos natin should be very conservative, and really–wag tayo magwaldas ng pera,” Dominguez said during the televised meeting of the Inter-Agency Task Force for the Management of Emerging Infectious Diseases (IATF-EID).
Dominguez pointed out that the result of these marching orders from the President is a well-managed economy, “so even though we had the bad luck to have this COVID-19, we are financially able” to respond to its challenges.
“So Mr. President, you have created an economy that can stand a hard hit and I think the Filipino people should thank you for your very conservative economic policies,” Dominguez said.
Dominguez thanked the Congress for enabling the government to meet the new set of priorities triggered by the COVID-19 outbreak by providing the President with the power—under Republic Act (RA) No. 11469 or the Bayanihan to Heal as One Act—to realign and reallocate savings from the 2019 and 2020 national budgets.
These savings were used to finance the emergency subsidies for vulnerable sectors most affected by the crisis and boost the capability of the country’s healthcare system and its front-liners in defeating the pandemic, Dominguez said.
“We want to assure all our citizens that at this point we have the money. Although, we have to realize that our funds are not endless so we need to spend it correctly, and not on wasteful expenditures,” Dominguez said.
With the economy taking a hard hit as a result of the COVID-19 emergency, Dominguez said the President’s economic team projects GDP growth to dive to -0.8 to o.0 percent this year, and the budget deficit to rise to 5.3 percent.
“With a bigger deficit, this means we will be spending more than we will be collecting. But we are spending more in order to save the people and make sure that they have food on the table during this time,” he noted.
Around 1.2 million workers could be temporarily rendered jobless because of the pandemic, but this is in comparison with the lowest unemployment rate ever in the country, Dominguez said.
The country’s debt-to-GDP ratio will also rise to about 46.7 percent of GDP, but this is still very low and will enable the government to borrow more money from multilateral institutions to support the economy and fight COVID-19, Dominguez said.
He said the fiscal and monetary actions with a combined value of P1.17 trillion account for around 5 percent to 6 percent of GDP.
If the P1.17 trillion worth of monetary and fiscal actions are not enough to fight COVID-19, Dominguez said the government is ready to tap the commercial markets for additional funds. “We have a good credit rating, it rose, we are now ‘BBB Plus’–the highest we have ever achieved,” he said.
An economic bounce-back program is also in the works, Dominguez said, which is why the government is undertaking a survey among businesses and consumers to assess the damage of COVID-19 to the economy.
“We will analyze that (survey) to determine where the biggest damage lies– in tourism, in manufacturing–and the companies hardest hit—either small and medium enterprises or the big corporations,” Dominguez said.
“We are confident that we have the financial capability to bridge this problem that the COVID-19 has brought us,” he added.