Gov’t sees early signs of economic recovery

The proposed P4.5-trillion 2021 national cash budget submitted to Congress on Tuesday coupled with fiscal and infrastructure stimuli would support the green shoots of economic recovery from the COVID-19 crisis, the country’s chief economist said.

“We are starting to see a U-turn in the trajectory of economic activity and manufacturing production. While we are not yet in the positive territory, we are hoping that we can continue to manage this recovery as best as we can,” Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said in a statement Tuesday.

Speaking in an online conference on Tuesday, Bangko Sentral ng Pilipinas Gov. Benjamin Diokno also noted indications that the worst might be over for the Philippine economy—which suffered its worst contraction in recorded history in the second quarter of this year—lending credence to predictions that growth will rebound sharply next year.

Chua, who heads the state planning agency National Economic and Development Authority, noted that the COVID-19 recovery program included the 2021 budget, the Bayanihan to Recover as One Act or Bayanihan 2 pending President Duterte’s signature, as well as the ambitious “Build, Build, Build” infrastructure program.

At the height of the longest and most stringent COVID-19 lockdown in the region, the government spent P655 billion to not only beef up medical response against the pandemic but also give away dole-outs to poor families and displaced workers, Chua said.

“Moving forward, we are optimistic that the Bayanihan 2 will help the country bounce back from the crisis with its improved provisions on the health-care system, public transport and restoring consumer demand,” Chua added, referring to the P165.5-billion fiscal stimulus already passed by the two chambers of Congress.

Separately, the Department of Budget and Management (DBM) said that next year’s national expenditure program equivalent to 21.8 percent of gross domestic product (GDP) and 9.9-percent higher than this year’s P4.1-trillion budget “will focus on containing the spread and mitigating the effects of the virus while restarting the economy to help the nation reset, rebound, and recover from the crisis.”

“It will sustain and strengthen efforts to bolster the health care system, ensure food security, invest in physical and digital infrastructure, and provide support and protection for the most vulnerable and affected sectors of society,” the DBM said in a statement.

In 2021, the economic team had projected government spending on public goods and services to reach P4.47 trillion while tax and nontax revenues would amount to P2.72 trillion, resulting in a budget deficit of P1.75 trillion, equivalent to 8.5 percent of GDP.

To help the country “reset” or better respond to the pandemic, next year’s budget will set aside P203.1 billion for universal health care, including P71.4 billion for the national health insurance program being implemented by the state-run Philippine Health Insurance Corp. as well as P2.5 billion to buy COVID-19 vaccines for the 20 million poorest Filipinos who will get them for free.

To “rebound,” the 2021 budget allocated P1.11 trillion or 5.4 percent of GDP for the “Build, Build, Build” program to revive infrastructure development, of which the bulk will go to implementing agencies such as the departments of Public Works and Highways and of Transportation.

In order to “recover” or adapt to the post-pandemic life amid a “new normal,” next year’s appropriations will also ensure funding for education, food security, governance and crosscutting concerns, industry and livelihood, as well as social protection.

“The fiscal year 2021 national expenditure program is thus based on the sound fiscal policy of spending within means, on the right priorities, and with measurable results under a regime of transparent, accountable and participatory governance,” the DBM said.

Meantime, Diokno said foreign investors should also look at the country as a safe haven for their investments when the latest numbers are taken together with its strong fundamentals.

“Our projections [for a strong 2021 performance] are supported in part by initial signs of recovery,” he said in remarks delivered during the virtual investors’ conference on the country’s prospects hosted by Japanese investment bank Nomura.

“For instance, manufacturing activity is recovering, with the volume of production index improving to -19 percent in June from -39 percent in April,” he said pointing to the slowing rate of decline. “Exports improved to -13 percent in June from -50 percent in April.”

Meanwhile, exports to China—the Philippines’ top trading partner—was up 2.8 percent in June, a reversal from a 55-percent contraction in April, amid expectations that China’s economic recovery in the the second semester of 2020 will also buoy the Philippines’ growth.

“With the indicators of recovery, I am confident the Philippines will soon go back to its path toward becoming a more inclusive upper middle-income economy over the medium term,” Diokno said.

The central bank chief said that, like many economies across the globe, the Philippines contracted in the first semester. INQ