Raising COVID-19 funds: PH can afford deficit up to only 9 percent of GDP

Despite more funds needed to continue responding to the COVID-19 crisis, the Philippines can afford to widen its budget deficit to only up to 9 percent of gross domestic product (GDP), a Department of Finance (DOF) official said on Tuesday (June 2).

At an online forum, Assistant Finance Secretary Antonio Joselito G. Lambino II said “there are so many competing requests for stimulus” funding.

“Our deficit is already higher than 8 percent of GDP. And the bills that we’ve seen in terms of economic stimulus plans—they all blow up the deficit,” said Lambino, who is also DOF spokesperson.

Last May, the Cabinet-level Development Budget Coordination Committee (DBCC) projected this year’s budget deficit will balloon to P1.563 trillion, equivalent to 8.1 percent of GDP, and this estimate had yet to include the impact of various stimulus packages pending in Congress.

For instance, the Accelerated Recovery and Investments Stimulus for the Economy of the Philippines (Arise Philippines) Act approved by the House of Representatives on second reading will cost P1.3 billion, while the Philippine Economic Stimulus Act (Pesa) will require P548 billion if it was to be implemented this year.

But Lambino said “we would like to stay at a maximum of 9 percent” of GDP as far as this year’s budget deficit ceiling was concerned.

“We’ve got to be very careful because we have to make sure that we maintain our competitiveness in this space,” Lambino said.

“We have to stay somewhere in the middle of our Asean neighbors and peers globally in terms of the deficit because we are benefitting quite a bit from a well-functioning debt management strategy,” he said.

The DOF and the National Economic and Development Authority (Neda) had been pushing for the P173-billion Philippine Program for Recovery with Equity and Solidarity (PH-Progreso), equivalent to 0.9 percent of GDP.

PH-Progreso calls for the extension until yearend of the Bayanihan to Heal as One Act, and passage of several measures by Congress:

Financial Institutions Strategic Transfer (Fist)
Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (Guide)
Capital and spending support for businesses and consumers
Liquidity for banks and companies
Corporate Recovery and Tax Incentives for Enterprises (Create) which would slash corporate tax to 25 from 30 percent

Last week, acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said a fresh P846-billion stimulus was needed to revive the economy.

If Congress passes so PH-Progreso P673 billion, equivalent to 3.5 percent of GDP, could come from budget savings, off-budget items, monetary policy, financial sector regulatory relief, and private sector contribution and won’t add to the already bloated fiscal deficit.

Edited by TSB