The economic team could rethink the recovery

A MAN is inculcated with pfizer at the Caloocan City sports complex on June 28th. – PHILIPPINE STAR / MICHAEL VARCAS

Through Luz Wendy T. Noble, Journalist

ECONOMIC MANAGERS now seem willing to consider a third stimulus package that could help improve the Philippines’ recovery outlook, after Fitch Ratings gave a “negative” outlook on its credit rating.

“The Development Budget Coordination Committee (DBCC) will meet [this Monday]. We’ll see what happens, ”Budget Secretary Wendel A. Avisado said in a Viber message to Business world.

Mr Avisado said discussions on Bayanihan III could be part of the DBCC’s agenda.

The House of Representatives has already approved a third stimulus package worth 401 billion pesos. Bill 9411 or the Bayanihan to Arise as One Act (Bayanihan III) could be the most important in the Bayanihan series of stimulus packages if passed by Congress.

However, its counterpart measure remains pending at the Senate committee level.

Socio-economic planning secretary Karl Kendrick T. Chua said some provisions of Bayanihan III could be taken into account if additional funds were available.

“There are articles [from the measure] that we can pursue if we have additional savings or income, ”Mr. Chua said in a Viber message.

For Marikina Rep. Stella Luz A. Quimbo, the adoption of a third stimulus measure could convince credit assessors that the Philippines could withstand the impact of the pandemic with “well-targeted spending” that will help businesses and individuals.

“High-impact government spending will be essential to boost the growth trajectory of our economy and improve our long-term prospects. Bayanihan III presents a spending plan to help ensure that public funds are well targeted and used productively, ”Ms. Quimbo, one of Bayanihan III’s main supporters, said in a Viber message.

Fitch Ratings last week revised the outlook for the Philippines from “stable” to “negative”, saying this reflects “increasing risks to pro credit.Fithe impact of the pandemic and its consequences on policy development as well as on Fiscale results.

While Fitch has maintained the Philippine “BBB” sovereign rating, a “negative” outlook is a warning that this rating could be downgraded in the next 12-18 months.

“Fitch will monitor the evolution of the Fiscale ofFicit and debt levels, because the balance between FiConsolidation at scale and ongoing government spending to support the economic recovery will be an important factor for the rating, ”the credit assessor said.

Bangko Sentral ng Philippines Governor Benjamin E. Diokno, however, said he did not believe Bayanihan III could raise the country’s rating outlook.

“I don’t agree, however, that legislating on Bayanihan III will help us improve our rating outlook after Fitch downgraded the country’s outlook from ‘negative’ to ‘stable.’ Nonetheless, it should be noted that in a sea of ​​global rating downgrades last year and this year Fitch has affirmed the quality of investment from the Philippines… This should be seen in a positive light, ”he said Business world in a Viber message.

Mr Diokno, a former budget secretary, said what will be crucial for the government is to speed up the vaccination campaign, continue structural reforms and aggressively pursue infrastructure projects.

“These measures will greatly improve the Philippines’ growth prospects and its ability to attract foreign direct investment,” he said.

“Bayanihan III’s rationale fades with the presentation of next year’s presidential budget in about a month.”

The Ministry of Budget and Management said earlier it was proposing a national budget of P5 trillion that will focus on the roll-out of immunization and increased support to local governments, among others.

With the implementation of the Mandanas decision next year, Mr. Diokno said more tax resources will go to local government units (LGUs).

“LGUs may be better placed to meet the needs of their local constituents who are affowed by the pandemic. If local offibusinesses don’t want to overburden their budgets due to the high incidence of COVID-19 in their community, so they should exercise more effout to contain the virus through strict application of the health protocol and more aggressive contact tracing. This is what we call “compatible incentive”, he added.

Lawmakers pushed for another stimulus package, even before the Bayanihan II expired in June.

“Over the past year, the lack of a sufficiently large economic stimulus plan has contributed more to the contraction of the economy and the reduction in tax collection than prudent management of our debt”, Ms. Quimbo said.

Bank of the Philippines Islands chief economist Emilio S. Neri, Jr. said the country “appeared to have sacrificed so much” to maintain its investment-grade credit rating through fiscal prudence at the expense of impossibility to spend more for economic recovery.

“The decision to choose the austerity path seems to have had a greater effect on the decline in our nominal GDP (denominator) than the increase in our public debt (numerator) resulting in our debt-to-GDP ratio to show the fastest deterioration in Southeast Asia. compared to 2019 levels, ”Neri said in a Viber post.

The Philippines’ debt-to-GDP ratio stood at an all-time high of 39.6% at the end of 2019. Since the pandemic, the ratio has climbed to 60.4% at the end of March 2021.

Amid growing debt, the economy shrank to a record 9.6% in 2020, the worst in Southeast Asia. The Philippines remains in recession, with GDP down 4.2% in the Fifirst trimester.

Budget support from Bayanihan I and II was equivalent to 4.4% of the country’s GDP in 2020, according to the International Monetary Fund’s policy tracker as of July 1. Other measures, including credit guarantees, accounted for 0.6% of GDP in 2020.

“Long-lasting reforms such as sealing leaks in our tax system and lifting bank secrecy rules are also needed to improve incomes and not have to rely primarily on austerity, debt monetization and key rates. real negatives to keep our public sector deficits manageable, ”Mr. Neri mentioned.

In May, S&P Global Ratings retained its “BBB +” rating with a “stable” outlook for the Philippines, citing expectations of an economic recovery.

Moody’s Investors Service maintained its “Baa2” rating with a “stable” outlook for the Philippines in July 2020. In March 2021, Moody’s declared the new COVID-19 surge to be “credit negative” for the country.


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