Good PH macro fundamentals intact despite COVID-19 scourge, says DOF

Last year’s wider budget deficit as a result of increased government spending to fight the prolonged COVID-19 pandemic has augured well for the Philippines’ rebound from its pandemic-induced economic slump, the Department of Finance (DOF) said on Thursday.

DOF Undersecretary and chief economist Gil Beltran also pointed to “a strong revenue performance,” which he said “enabled the country to maintain good macroeconomic fundamentals, attain manageable inflation, sustain low interest rates, and keep its investment-grade credit rating.”

The national government’s end-November 2021 budget deficit widened by 24.6 year-on-year to P1.33 trillion, nearly matching the full-year fiscal gap of P1.37 trillion in 2020.

The Cabinet-level Development Budget Coordination Committee had estimated the fiscal deficit to have ended 2021 at a smaller P1.61 trillion or 8.2 percent of gross domestic product (GDP), compared to the programmed P1.86 trillion or 9.5 percent of GDP.

End-November expenditures rose 11.4 percent year-on-year to P4.11 trillion, while 11-month tax and nontax revenues grew 5.9 percent to P2.77 trillion, reversing the drop in 2020 amid that year’s pandemic-induced recession.

“These positive developments augur well for a strong economic recovery as the country gradually loosens its quarantine restrictions,” Beltran said.

However, Metro Manila and four neighboring provinces had been placed until the middle of this month under more stringent alert level 3 restrictions amid a surge in COVID-19 cases following the Christmas holidays and the entry of the Omicron strain.

In a Jan. 5 report, ING Asia-Pacific research head Robert Carnell placed the Philippines in the middle, in terms of resiliency on one end and vulnerability on the other, against Omicron.

Deemed more vulnerable to the Omicron variant due to the lower share of fully vaccinated plus reliance on non-mRNA vaccines were India and Indonesia.

ING warned that the Philippines and Indonesia’s reliance on mostly China-made traditional vaccines in the past may not keep Omicron risks at bay.

“As well as India, both Indonesia and the Philippines also lag the median in terms of vaccination rates and in terms of the prevalence of mRNA vaccines in that mix. Both countries struggled with access to vaccines in the early stages of the rollout and had to rely on donations of Sinovac/Sinopharm as well as Astra-Zeneca. More recently, both countries have been concentrating more on mRNA vaccines, but the bulk of their historical vaccine protection relies on traditional vaccines that may prove ineffective against Omicron,” ING said.

On the other hand, ING considered Australia, Hong Kong, Japan, Singapore, South Korea, and Taiwan among the more resilient to shocks from Omicron’s spread in the region.