The latest surge in coronavirus disease (Covid-19) infections is expected to result to below-target growth for the Philippine economy this year, Finance Secretary Carlos G. Dominguez 3rd.
“Well, I think it’s going to be lower than what we expected. This surge in the contagion, which is incidentally happening in Brazil, Canada, France, and Turkey, and other places is certainly not good for the economy,” he said in an interview over Bloomberg TV on Tuesday.
He estimates the latest lockdown to cost the economy “one half of 1 percent.”
Economic managers have set a growth target, as measured by gross domestic product (GDP), of between 6.5 and 7.5 percent this year.
The country is registering a surge in new cases since March this year, with the new record-high registered last April 2 at 15,310 infections.
The government has initially set a week-long enhanced community quarantine (ECQ) for the National Capital Region (NCR) and four nearby provinces – Bulacan, Rizal, Cavite, and Laguna – collectively called NCR Plus from March 29-April 4 but extended this for another week, or until April 11, to address the rising infections.
Dominguez pointed out that despite this development, the death rate in the country remains below those of Western countries at 12 deaths per 100,000 individuals compared to over 150 deaths per 100,000 individuals in other countries.
“We are coping with this surge and the best way we thought to do it was to have a curtailment of activities especially in the Metro Manila area for at least two weeks,” he said.
The country has imposed movement restrictions since mid-March 2020 but these have been eased following the drop in the number of infections to allow a recovery in domestic activity.
Last year, the whole of Luzon, which accounts for around 70 percent of GDP, was placed under ECQ from March 17 until end-April, with the movement restriction in NCR extended until end-May.
Other areas around the country were also placed in various levels of movement restrictions to contain the spread of the virus.
Because of the quarantine measures, domestic output registered a -9.5 percent print last year, with the second quarter figure posting a decades-long contraction of -16.9 percent.
Meanwhile, Dominguez said the government continues to have fiscal leeway despite the financing for Covid-related programs since last year.
Last year, the government extended P5,000 to P8,000 cash aid to around 18 million low-income households and to workers belonging to sectors greatly affected by the quarantine measures.
For this year’s ECQ, the government is using the P23 billion untapped allocation under the Bayanihan 2 law as subsidy for around 80 percent of the population in the NCR Plus.
To provide a boost in domestic economic activity last year, the Bangko Sentral ng Pilipinas (BSP) injected an equivalent of nearly P2 trillion in the financial system through, among others, the total of 200 basis points cut in the central bank’s key policy rates and up to 200 basis points reduction in banks’ reserve requirement ratio.
BSP also extended P840 billion worth of liquidity boost to the national government last year through a P300 billion short-term repurchase deal and a P540-billion cash advance. Both of which have been redeemed and repaid last year.
Last December, BSP’s policy-making Monetary Board (MB) approved another P540 billion provisional advance to the national government to help in the government’s recovery programs.
Dominguez discounted another move to further tap the central bank for liquidity boost this year.
“We will probably look to wind it down sometime late this year or early next year, depending on the situation,” he added.