The Department of Finance (DOF) would not bow down to pressure to increase the national government’s economic stimulus to cushion the impact of the pandemic-induced crisis.
In a statement, Finance Secretary Carlos G. Dominguez III said the proposed P180 billion economic stimulus plan will remain unchanged to keep the national government’s budget deficit in check.
Dominguez said the Duterte administration-backed P180 stimulus plan, which incorporates around P40 billion in tax credits to the private sector, already taken into account the deep economic contraction seen in the second quarter.
He also said the government’s borrowing plan to cover a massive funding for both coronavirus response and economic recovery program is in place and will be sufficient to cover the country’s requirements for this year and next.
About 75 percent of the government’s projected borrowings of P3 trillion next year will be sourced from domestic lenders, and the remaining 25 percent from foreign sources, the chief economic manager said.
“Our recovery plan is in place and when it was made, we had anticipated a large reduction in the GDP growth ,” Dominguez said.
The country’s GDP shrank by 16.5 percent in April to June, resulting to a first-semester contraction of 9.0 percent.
Dominguez said the government is ready to spend P140 billion for an economic stimulus plan this year, and free another P40 billion in tax credits to the private sector in the form of an immediate reduction of the corporate income tax rate from 30 percent to 25 percent.
“This number was arrived at to keep our fiscal deficit in a manageable zone,” Dominguez said.
Earlier, Dominguez said the government expects a higher deficit-to-GDP ratio for 2020 that it aims to keep below or at the median of the levels of its peers in the Association of Southeast Asian Nations (ASEAN) region.
For this year, Dominguez projects a ceiling on the deficit-to-GDP ratio at 9.6 percent, which will lower to 8.5 percent in 2021 and 7.2 percent in 2022.
But Dominguez’s level of stimulus received a lukewarm reception from lawmakers, businessmen and analysts as they urge government should set-up a substantial fiscal program to revive the economy.
In particular, Marikina Rep. Stella Luz A. Quimbo, co-chair of the House of Representatives’ panel on economic stimulus, proposed a P1.56 trillion stimulus focused on wage subsidies and low-interest loans for small businesses.
Dominguez thumbed down Quimbo’s proposal, saying government must conserve its “fiscal stamina” to sustain a long-drawn out battle against coronavirus.