‘Steady yet moderate phase’ for economic recovery — DOF

MANILA, Philippines — The Philippine economy is expected to recover at a “steady yet moderate phase” following the reimposition of modified enhanced community quarantine or MECQ in Metro Manila and nearby provinces, the Department of Finance (DOF) said over the weekend.

In a statement, Finance Secretary Carlos Dominguez said economic rebound is seen to proceed in the third quarter of the year, given the calibrated reopening of businesses since the end of May.

But he said recovery may happen at a “steady, yet moderate phase, more so after President Duterte made the tough, but necessary decision this week to reimpose a two week MECQ to further boost our healthcare capacity amid a virus resurge.”

“The economy is in good shape to mount a strong recovery soon enough, given the positive metrics, such as benign inflation, a peso that is the strongest currency in Asia, and high-investment grade credit profile that has enabled us to borrow money here and abroad—at relatively lower cost—to fund our programs for COVID-19 response and other requirements,” he said.

The Philippine economy contracted by 16.5 percent in the second quarter of the year, plunging the country into a recession. In the first half of the year, economic contraction averaged at nine percent.

According to Dominguez, the economy will improve in the second half of 2020 if all sectors work together to shore up consumer confidence and to curb the spread of the coronavirus.

While he acknowledged that the two-week enforcement of MECQ in Metro Manila and most areas of Calabarzon would negatively impact livelihoods, production  and household consumption, he said this measure could have positive benefits in the long run.

That is, if the government and private sector use this period to bolster the country’s health care resources to manage the spread of the virus.

“As I have said earlier, the whole world is learning how to dance with this lethal virus: two steps forward and one step back,” he said.

In the meantime, the finance chief said the government has the resources necessary to endure the challenges brought about by this health crisis.

Dominguez, however, also emphasized the need to ensure that the country has enough fiscal resources for a protracted fight against COVID-19.

“When Senator Pacquiao trains for a fight, he prepares for 12 grueling rounds. As there can be no knock-out punch that cuts our fight short before a vaccine is developed, the government’s ability to sustain the fight depends on our fiscal stamina. We have the resources necessary to endure this challenge, but we must also conserve our resources for succeeding rounds of this fight,” he said.

Earlier, Dominguez said any stimulus package the government puts out must be “affordable” to ensure fiscal sustainability.

He said the government is prepared to spend P180 billion for its fiscal stimulus program.

This includes the P40 billion tax relief to be granted to businesses, with the proposed five-percentage point reduction in corporate income taxes under the Corporate Recovery and Tax Incentives for Enterprises bill.

The remaining P140 billion will be allocated under the Bayanihan to Recover as One bill or Bayanihan 2, which is also pending in Congress.