PH needs additional budget to offset economic downturn – economist

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Metro Manila (CNN Philippines, May 11) – The Philippines will need a sizeable budget to offset the negative impacts of the COVID-19 pandemic.

ING Bank Manila senior economist Nicholas Mapa told CNN Philippines that the country is dealing with the once-in-a-life-time pandemic, which will require a substantial response from the fiscal side.

"The bigger the budget, the better," Mapa said in an interview. "We will have to brace for some substantial economic pain in the near term if we don’t get this type of spending out there to offset this downturn."

Finance Secretary Carlos Dominguez III has cancelled a plan to seek from Congress a supplemental budget to partly bankroll the government’s ₱1.49 trillion socioeconomic strategy this year against COVID-19. 

The realignment of sizeable amounts from several items in the 2020 budget to programs aimed at cushioning the impact of the COVID-19 crisis, along with financing deals being worked out with bilateral partners, diminished the need for a supplemental budget, according to Dominguez.

However, Mapa said an upsize to the budget is needed to get a hold of the economy moving forward, and maybe see growth in the third or fourth quarter.

Mapa added that based on first quarter gross domestic product (GDP) numbers, the country's growth trajectory is on the downside.

"I’m bracing for a negative 5.6 percent in the second quarter and another negative 5.8 percent in the third quarter," Mapa said. "The likelihood that we might have some hardship, maybe some job losses are understandably going to be higher in an environment of slowing GDP."

The Philippine economy pulled back in the first quarter, contracting by 0.2 percent as the coronavirus pandemic has left millions of businesses and households paralyzed under lockdown.

Mapa stressed the need for the government's stimulus package to be directed to the right sectors, saying "the battle cry right now should be to save jobs."

“That’s what’s really going to get us back on track as quickly as possible, it’s making sure people have access to income and employment,” Mapa said.

When asked where the government might source additional funds, Mapa said they have the option to float bonds or borrow in the meantime, saying down the line, if the economy improves, revenues will eventually pick up.

“Now is not the time to be counting, I guess penny-pinching at this moment, we are in fire fighting mode, we have to get the ammunition out there to try to offset the impacts of COVID-19,” Mapa said.

Mapa added that government will have to "plug the hole left by the remittance drop," which is expected this year given the rising number of overseas Filipino workers who have lost their jobs abroad and are returning home to the Philippines.

Overseas Filipino workers are among the biggest contributors to the economy, with the money they send home fueling private spending locally.