October 20, 2020 at 08:30 pm
Julito G. Rada
Economic managers revised the gross domestic product forecast this year to a deeper contraction of 6 percent from the previous estimate of a 5.5-percent decline, taking into account the lockdown imposed in August to contain the spread of the pandemic, Finance Secretary Carlos Dominguez III said Tuesday.
Dominguez said in an online forum the economy would likely shrink by 6 percent in 2020 because of “the lockdown in August” that compelled economic managers to downgrade the projection.
The economy contracted by 9 percent in the first half, following the 0.7-percent decline in the first quarter and the deeper 16.5-percent drop in the second quarter. Dominguez said the Duterte administration was bent on rebuilding a better economy in 2021, with the expectation the COVID-19 pandemic would dissipate by that time.
He said the recovery would be supported by the enactment of Bayanihan 2 law and other economic reform measures, high infrastructure spending under the “Build, Build, Build” program and the 2021 national budget.
“Next year, we expect the Philippine economy to post a strong rebound. The challenges are large, but we are determined to build back a better economy that the Filipino people deserve,” Dominguez said in a presentation.
He said the Duterte administration was doing all it could to balance its efforts in reviving consumer confidence and reopening the economy. The government is implementing health interventions to flatten the curve, preserve and create jobs and steer the economy to a quick and strong recovery, he said.
“The Duterte administration’s aim is to pursue a safe new normal while we strive for a better normal. We cannot completely lock ourselves up to avoid COVID-19 at the expense of other vital dimensions of our lives. We should take less costly but effective measures,” Dominguez said.
The calibrated easing of mobility restrictions led to improved numbers in terms of the unemployment rate, which dropped to 10 percent in July from 17.7 percent in April, when strict lockdowns were still in place to prevent the further spread of the coronavirus.
Manufacturing also slowed down its contraction after the economy gradually reopened, while revenue collections by the Bureau of Internal Revenue and Bureau of Customs exceeded revised targets by 8 percent in the first nine months.
Dominguez expressed confidence that the nation could “outlast” the COVID-19 emergency as the Duterte administration consistently exercised prudence in managing fiscal affairs.
Meanwhile, Bangko Sentral ng Pilipinas Governor Benjamin Diokno told global credit watchdog Moody’s Investors Service that the Philippine economy would recover from the devastating impact of the COVID-19 pandemic.
“We are confident that the worst is over. We have started to open up the economy as lockdown measures have resulted in flattening the curve and allowed the government in building the necessary health capacity,” Diokno said in a presentation during the Moody’s credit rating call on Oct. 14 that was released to the media Tuesday.
Diokno said among the factors that continued to boost the economy were the benign inflation, strong external position, low debt ratio, remittances, the appreciating peso and the stable banking system.
He said inflation was expected to settle within the target range of 1.75 to 2.75 percent this year and 2 to 4 percent in 2021 and 2022. The low inflation gives monetary authorities room for monetary easing when needed, he said.
“On the external front, we continue to have a comfortable external payments position with gross international reserves at an all-time high of around $100 billion,” he said. The BSP expects the GIR to further increase to $102 billion next year.
The external debt ratio to GDP remained low at 23.7 percent as of end-June 2020, even with the recent increase in external borrowing to fund additional government spending to address the pandemic, he said.
Diokno said both the current account and balance of payments remained in surplus in the first semester. The BSP projects a current account surplus equivalent to 1.6 percent of GDP this year, up from a deficit of 0.5 percent of GDP as of May 2020.
“We expect BOP to post a surplus of around 2.2 percent of GDP, up from 0.2 percent of GDP as of May 2020,” he said.
Overseas Filipino remittances started to recover in recent months and were expected to increase by 4 percent next year from a contraction of 2 percent this year.
The peso is an outperformer this year, appreciating 4.7 percent against the US dollar, year-to-date, to its highest level since late-2016, according to the BSP governor.
“The appreciation is due mainly to the country’s external position, itself driven by a narrowing in the trade deficit and a rebound in remittances in recent months,” Diokno said.
Diokno said the domestic banking system remained fundamentally sound and resilient despite the health crisis as the regulatory measures put in place by the BSP through the years prepared banks to build enough buffers going into the crisis.
“The BSP’s stress test exercises and simulations point to favorable banking system prospects even with risks to the outlook,” Diokno said.