Close  

Additional stimulus seen not enough to reverse economic slowdown

By: - Reporter / @bendeveraINQ
/ 04:07 AM September 28, 2020

The government’s additional stimulus remains insufficient to reverse the Philippines’ fast economic slide such that recovery would be slower compared to its peers in the region, London-based Capital Economics said.

“Inadequate fiscal support is holding back growth in the Philippines and unless this improves, the recovery will continue to underwhelm,” Capital Economics senior Asia economist Gareth Leather and Asia economist Alex Holmes said in a Sept. 25 report titled “Philippines: weak recovery, new currency forecasts.”

ADVERTISEMENT

Capital Economics pointed to the mere 0.4 percent year-on-year increase in government spending in August, as well as to the meager financial war chest—estimated to be equivalent to about 3 percent of gross domestic product (GDP) —to address the health and socioeconomic crises inflicted by the COVID-19 pandemic.

In particular, Capital Economics flagged the delayed distribution of financial assistance to vulnerable households as “local governments have experienced difficulties identifying people who qualify for benefits.”

FEATURED STORIES

“Even if spending starts to pick up over the coming months, the government’s slow response has caused lasting damage to the economy in the form of higher unemployment and increased bankruptcies. Although we think that output bottomed out around April, we estimate that GDP in the Philippines is still around 10-percent below its precrisis level—one of the biggest gaps in the region,” Capital Economics said.

As such, Capital Economics said “the government’s poor response to the crisis puts increased pressure on the central bank to provide more support to the economy.”

Even as the Bangko Sentral ng Pilipinas (BSP) had indicated a pause from monetary easing after slashing the policy rate by a cumulative 175 basis points (bps) to a record-low of 2.25 percent at the height of the COVID-19 lockdown, Capital Economics projected another 25-bps cut during the Monetary Board meeting on Thursday, Oct. 1.

“With the pandemic weighing heavily on the economy, we doubt the BSP has finished easing. The bank gave strong hints at its last meeting [last August] that more cuts were coming, describing the decision to hold as a ‘prudent pause.’ The economy could certainly do with more support,” Capital Economics said. INQ

Subscribe to Inquirer Business Newsletter
Read Next
Don't miss out on the latest news and information.

Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.

TAGS: Business
For feedback, complaints, or inquiries, contact us.


© Copyright 1997-2020 INQUIRER.net | All Rights Reserved

We use cookies to ensure you get the best experience on our website. By continuing, you are agreeing to our use of cookies. To find out more, please click this link.