Finance Secretary Carlos G. Dominguez III. DOF PHOTO
As the global economy plunged into recession amid the COVID-19 pandemic, the Philippines will try to shield its domestic economy through a stimulus plan, the Duterte administration’s chief economic manager said.
Asked if the economic team will put in place additional fiscal and monetary measures amid the global recession declared by the International Monetary Fund (IMF), Finance Secretary Carlos G. Dominguez III replied: “We are targeting the first draft by the end of the week.”
In a statement on Tuesday (March 31), Dominguez said the planned stimulus package “will be responsive to the uncertainties of the situation,” adding that “at this point, nobody knows how bad this pandemic will get or how long it will last.”
Also, Dominguez said that the Philippines was “awaiting the details of the terms and conditions” of the IMF’s offer to wake its $1-trillion lending capacity for countries that need more financial assistance to combat economic ruin caused by COVID-19.
The government targets 6.5-7.5 percent growth this year, but estimates of the state planning agency National Economic and Development Authority (Neda) had shown full-year gross domestic product (GDP) could expand by at most 4.3 percent, or, in the worst case scenario, contract by 0.6 percent.
Last week, Dominguez said the government will give priority to helping displaced workers, flatly rejecting proposals to give more tax breaks to companies.
The Department of Finance (DOF) on Tuesday claimed that the emergency subsidies to be given away under Republic Act (RA) No. 11469 or the “Bayanihan to Heal as One Act” formed part of the biggest-ever social protection program in Philippine history.
“The P200-billion program for distribution in cash and basic needs over the next two months is the largest direct financial assistance program granted by the government to Filipino families in our country’s history,” Dominguez said.
“We will urgently deliver this emergency subsidy to millions of our fellow Filipinos who live day-to-day on subsistence earnings or ‘no-work, no-pay’ arrangements,” he said.
“The subsidies will be delivered through various national and local programs in the form of food, cash, and other essentials for the next two months, as provided in RA 11469,” Dominguez added.
For the private sector which is also reeling from COVID-19, Dominguez said the government will “eventually put in place programs for affected businesses so the economy could bounce back as soon as we beat this lethal virus.”
“For the moment, the government must attend to dislocated families and keep Filipino workers healthy so they are ready for the subsequent resurgence in economic activity,” according to Dominguez.
World Bank chief economist for East Asia and the Pacific Aaditya Mattoo said at a virtual press briefing attended by the Inquirer on Tuesday that economic stimulus packages being rolled out across the globe should also give priority to vulnerable sectors because “this is not an ordinary recession.”
“This is not a situation where unemployed workers and shut-down factories are waiting for government stimulus packages, injections of government spending, relaxation of monetary policy as a purely expansionary Keynesian kind of response,” Mattoo said, referring to the philosophy popularized by economist John Maynard Keynes, who advocated for increased government spending and lower taxes as economic stimulants.
“When people can’t work, that kind of traditional macroeconomic response might be too much rather than too little, because it might generate more inflation rather than economic activity,” Mattoo explained.
“In that first period [of response], the emphasis has to be to help consumers to smooth their consumption, to help firms to weather the storm,” Mattoo said.
“Once you have contained the virus, that’s when expansionary policy will be fighting for recovery, whether it’s fiscal or monetary,” Mattoo added.