A V-shaped economic recovery may not ensue unless the government can start spending fast the proposed P1.3 trillion stimulus package, a report released yesterday said.
Aside from this, there is also a need to ensure the ability of firms to restore and strengthen their supply chains and provide safe work environments for their employees, according to the Market Call, a monthly report released by First Metro Investments Corp. and University of Asia and the Pacific capital markets research.
“We see mid-August as a key to determining the speed of economic rebound as gross domestic product (GDP) numbers for Q2 come out, a new P1.3 trillion stimulus package gets approved, and coronavirus disease 2019 (COVID-19) deaths drop to minimal levels,” the report said.
“We expect GDP gains starting Q3 as Metro Manila, Calabarzon, and Central Luzon (more than 62 percent of GDP) get freed from most quarantine restrictions by mid-July,” it added.
Government projects the economy to contract between 2 and 3.4 percent this year.
In the first quarter, GDP retreated by 0.2 percent.
The report said national government spending can remain elevated only with the quick passage of the new stimulus package which proponents claim to reach P1.3 trillion, or some 7 percent of GDP.
“A good part of that would be spent only in 2021,” the report said.
The House of Representatives earlier approved on third and final reading the P1.3 trillion stimulus package.
However, Carlos Dominguez, Department of Finance secretary, previously pointed out while the various stimulus proposals in Congress to support the economy’s recovery from the COVID-19 pandemic are “well-intentioned,” these can be fiscally unsustainable.
Dominguez said last month the fiscal deficit for the year is projected to be around 8.1 percent of GDP, however the economic team is “willing to push it up to 9 percent.”
“That is how much additional we can fund, between 8.1 percent and 9 percent (of GDP).
And currently, that is more or less P170 or P180 billion. But we cannot afford P1.3 trillion.
That is just very simple,” he said, referring to the value of the economic stimulus package approved by the House.
Meanwhile, the Market Call said limited availability of public transportation and fear of the virus may slow down the return of workers to construction sites and manufacturing facilities.
“Consumer spending may not recover as fast as firms rebound as the former may feel the need to save more for ‘unexpected adverse events,’ such as a wave two of the virus (unlikely though), typhoons (with the official declaration of the typhoon season’s entry), or even the slow flow of financial support from the government and firms,” it added.
