The proposed P180-billion economic stimulus plan has taken into account the sharp contraction of the economy in the second quarter, and will be maintained at this level to keep the budget deficit manageable, the Department of Finance (DOF) said.
Carlos Dominguez, DOF secretary, said in a statement over the weekend the government’s borrowing plan to cover the massive funding for both its coronavirus disease 2019 (COVID-19) pandemic response and economic recovery program is also in place and will be sufficient to cover the country’s requirements for 2020 and 2021.
About 75 percent of the government’s projected borrowings of P3 trillion next year will be sourced from domestic lenders, and the remaining 25 percent from foreign sources, Dominguez said.
“Our recovery plan is in place and when it was made, we had anticipated a large reduction in the GDP (gross domestic product) growth (in the second quarter),” Dominguez said.
The country’s GDP shrank by 16.5 percent in the second quarter, resulting in a first semester contraction of 9 percent.
Dominguez said the government is ready to spend P140 billion for an economic stimulus plan this year, and free another P40 billion in tax credits to the private sector in the form of the immediate reduction of the corporate income tax rate from 30 percent to 25 percent starting this 2020, via the proposed Corporate Recovery and Tax Incentives for Enterprises bill, which will bring the total recovery package for the year to P180 billion.
“This number was arrived at to keep our fiscal deficit in a manageable zone,” Dominguez said.
Earlier, Dominguez said the government expects a higher deficit-to-GDP ratio for 2020 that it aims to keep below or at the median of the levels of its peers in the Association of Southeast Asian Nations region.
For this year, Dominguez projects a ceiling on the deficit-to-GDP ratio at 9.6 percent, which will lower to 8.5 percent in 2021 and 7.2 percent in 2022.
“Whatever stimulus package we have, it has to be affordable and it has to recognize the fact that this (corona) virus may not be defeated by the end of this year,” Dominguez said.
“We have to keep our powder dry for next year as well,” he added.
Dominguez assured the public government has “the resources necessary” to prevail over the challenge of COVID-19 and its adverse economic impact, following the first semester contraction of the economy. (A. Celis)