Finance chief sees worse GDP slump

MANILA, Philippines — The government now expects a deeper economic contraction this year following the reimposition of strict lockdowns in Metro Manila and nearby provinces in August, the Department of Finance (DOF) said yesterday.

In an online business forum, Finance Secretary Carlos Dominguez said the country’s gross domestic product (GDP) is projected to shrink by about six percent this year.

“For the entire year, we project our economy to contract by about six percent. We have seen unemployment spike when the domestic economy was hindered by the lockdown. Our enterprises have borne the brunt of the economic downturn,” Dominguez said.

The new figure is worse than the projection of the inter-agency Development Budget Coordination Committee (DBCC) of a 5.5 percent contraction.

Sought for further details, Dominguez, in a text message, said the downgrade in the GDP forecast was a result of the reimposition of the modified enhanced community quarantine (MECQ) in Metro Manila and some areas of Calabarzon in August.

He said the DBCC is discussing its macroeconomic assumptions for this year to take into account the effects of the reimposition of MECQ in Metro Manila and nearby provinces.

Despite the expected deeper contraction this year, Dominguez is still optimistic the economy will be able to make a strong rebound by 2021.

The DBCC projects GDP growth to settle from 6.5 percent to 7.5 percent next year and in 2022.

“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,” he said.

He said the government is balancing its efforts to revive consumer confidence and further reopen the economy, while implementing health interventions to contain the coronavirus pandemic.

The finance chief said that the calibrated easing of mobility restrictions led to improved unemployment numbers, which dropped to 10 percent in July from 17.7 percent in April, when strict lockdowns were still in place.

He said the contraction of the manufacturing sector also slowed down in recent months as the economy was gradually reopened, while the revenue collections of the Bureau of Customs and Bureau of Internal Revenue exceeded targets.

Dominguez expressed confidence that the nation can “outlast” the COVID-19 emergency as the government has been consistently exercising prudence in managing its fiscal affairs.

“While strengthening our health system, we also intend to continue finding more ways to help revive the domestic economy. We are turning this crisis into an opportunity to boost the competitiveness of our manufacturing and agriculture sectors. We support the rehabilitation of our tourism infrastructure and facilities,” Dominguez said.

“We are accelerating digital transformation of our government processes to drastically cut red tape, hasten the delivery of services to the people, and curb corruption. The Department of Finance is also studying how to tax the digital economy better,” he said.

Furthermore, the DOF chief said the passage of the Bayanihan to Recover as One Act would provide the much-needed support to key industries.

He said the passage of other reforms, such as the Corporate Recovery and Tax Incentives for Enterprises (CREATE), and Financial Institutions’ Strategic Transfer (FIST) bills would also help ensure the country’s recovery.

“The swift passage of our 2021 national budget is also crucial. It will provide us with the tools necessary to rebuild our economy,” Dominguez said.