THE country’s first quarter economic growth figure might be “more positive than negative,” according to Carlos Dominguez, Department of Finance (DOF) secretary.
However, he admitted the economic impact of the coronavirus disease 2019 (COVID-19) pandemic for the year “might be” worse than earlier projected, although adding the government is in a good financial position to address the impact of the virus.
The first quarter performance of the Philippine economy is scheduled to be announced by the National Economic and Development Authority and the Philippine Statistics Authority at 10 a.m. today.
Dominguez said in a press briefing at the DOF office in Manila yesterday the economy’s performance in January looked okay but noted the impact of the eruption of Taal Volcano. There was also the travel ban implemented for those coming from China in February, amid the spread of the coronavirus. Finally, in mid-March, the enhanced community quarantine (ECQ) was implemented.
“When we calculate it, I think it’s more positive than negative because the curtailment was less than one half of the period of the quarter. But I think, April, May and June are going to be quite bad,” Dominguez said.
Asked if the economic effect of the pandemic for the year is worse than earlier projected, with the government expecting growth for the year to be flat to negative 0.8 percent, Dominguez said: “Might be. Because we are monitoring reports from other countries and it looks like there is no magic medicine for this thing.”
“We have to remember that we are in a very good financial position. The rating that came out under emerging economies by The Economist, we came up in the top 10. We are sixth out of 66. That I think should assure people that we are very well capable of meeting the financial requirements of this COVID hit,” Dominguez however said.
“The reason that we are there is because of the good policies of President Duterte, where he has been able to increase our revenues in a very fair way. He has been able to invest only in projects that are very good and has been able to avoid large scale corruption in all these projects and that the projects are evaluated based on their social and economic returns and the returns are very, very good. Aside from the fiscal side, we are also (in) very strong monetary position. Our total foreign reserves are more than our total debt. That’s why you’ve noticed that peso is the least depreciated among the Asean countries, and in Asia I think we are only second to Japan,” he added.
Meanwhile, a report released by First Metro Investment Corp. and the University of Asia and the Pacific Capital Markets Research said a flat to slightly negative movement in the economy is expected in the first quarter given that the ECQ came in late in the quarter.
The latest publication of the Market Call, released yesterday, said agricultural and mineral product exports from Mindanao will contribute to this growth.
“However, the overall impact of the ECQ on GDP (gross domestic product) growth remains difficult to pin down or even model, the biggest dent should occur in Q2, with Luzon’s full month of ECQ, supply chains just being restored, while consumers may opt to stay home,” it said.
“We think the economy will contract severely in Q2 and will thus have a difficult time rebounding quickly (V-recovery) to positive territory for the full-year 2020. The economy may instead see a U-type of recovery from a period of decline to a slow movement back to normalcy,” it added.
The report said government deficit will likely widen to 7 to 8 percent of GDP for the full year as tax revenues suffer from lack of production due to the lockdown.
“Nevertheless, the government still has the ability to borrow more from both domestic and foreign sources in order to boost its COVID-19 response program,” the report said.
“Meanwhile government spending will balloon with subsidies and rebooting of infrastructure spending. However, the debt-to-GDP ratio will rise to a still reasonable level of 46 to 48 percent from 41.5 percent in 2019,” it added.
