The Department of Finance (DOF) reported on Monday (April 26) that the value of the country’s response against Covid-19 so far has amounted to P2.73 trillion or 15.4% of our gross domestic product (GDP) as of Dec. 31, 2020.
DOF Secretary Carlos Dominguez said at the Sulong Pilipinas: A Pre-SONA Economic Development and Infrastructure Cluster Forum that this amount covers assistance to vulnerable sectors through the social amelioration program (SAP), wage subsidies, and funding of provisions in the Bayanihan 2 law.
Based on his report, P506.09 billion was allocated for emergency support for vulnerable groups when the country resorted to lockdowns, P58.93 billion for marshalling resources, P1.41 trillion for monetary actions to keep the economy afloat, and P791.61 billion for economic recovery.
However, the budget deficit of the country as of 2020 grew to 1.371 trillion. The debt-to-GDP ratio also rose to 54.5% during the same year from 39.6% before the pandemic. Rizal Commercial Banking Corporation chief economist Mike Ricafort said this figure has grown to 58%, which is close to the 60% international threshold.
“Breaching above the international threshold of 60% debt-to-GDP ratio would make fiscal management/debt management less sustainable over the long-term, and could have adverse effects on the country’s relatively positive credit ratings and outlook that somewhat defied the COVID-19 pandemic that resulted to downgrades in other countries around the world,” Ricafort explained.
“Yes, the current debt-to-GDP ratio is currently hovering at 57% to 58%, from 54.5% in end-2020, amid wider budget deficit recently, thereby making additional stimulus measures more challenging unless there are new sources of new government revenues to fund them,” he added.
According to Budget Secretary Wendel Avisado, the revenues of the country will increase and the deficit will decline in 2022 as the economy recovers.
To balance the borrowings and raise more funds, the DOF proposed to increase the dividend remittance of government-owned and controlled corporations to the National Treasury from 50% to 75%.
Moreover, economic managers explained that the Build, Build, Build program will primarily drive the recovery of the economy with higher infrastructure spending that is equivalent to over 5% of the GDP.
“We are fully determined to restore the vigor of the Philippine economy at the soonest possible time. Even with the unprecedented crisis, the Duterte administration will continue to work hard until the last minute of its term to undertake the remaining reforms we had set out to do in our zero-to-ten-point socioeconomic agenda,” Dominguez said.
Reforms
Socioeconomic Planning Secretary Karl Kendrick Chua said the following reforms will provide support for the recovery of the economy which is expected to begin this year:
- Military and Uniformed Personnel (MUP) pension program
- Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) bill.
- Comprehensive Tax Reform Program (CTRP)—Package 3
- Comprehensive Tax Reform Program (CTRP)—Package 4
- Amending the Foreign Investments Act (FIA)
- Amending the Public Service Act (PSA)
- Amending the Retail Trade Liberalization Act (RTLA)
The official said the economy is expected to grow by 6.5% to 7.5% by the end of 2021, and from 8% to 10% by 2022. However, tight restrictions may affect this prospect which can be prevented through safe economic reopening. – Report from Naomi Tiburcio/AG-jlo
Watch this report from Naomi Tiburcio for more details:
