Pernia flags government COVID-19 underspending

MANILA, Philippines — Former Socioeconomic Planning Secretary Ernesto Pernia took a swipe at the government yesterday for continuing to underspend amid the pandemic, saying fears of erosion of credit ratings are “unfounded.”

In a presentation delivered yesterday at the Pilipinas Conference 2020 organized by Stratbase ADRi, Pernia said that the country’s COVID-19 response spending at $21.65 billion as of this month remains the lowest among five other large economies in the region that include Indonesia, Malaysia, Singapore, Thailand and Vietnam.

The country’s spending in response to the pandemic is equivalent to 5.88 percent of gross domestic product (GDP) at $202 per capita for a population of around 100 million.

“Considering that we have a large population, next only to Indonesia, and in terms of population to resource ratio we have a very low ratio. We also have the highest inequality and poverty in ASEAN. So that’s why I think it’s not a good thing to be conservative in COVID (response) spending,” said Pernia.

“The government has been rather stingy in spending for COVID response which has impacted our health system capacity as well.”

This, in turn, has kept the budget deficit low at 6.26 percent while debt-to-GDP has remained manageable at 48.1 percent.

“Whereas the other countries had big spending at the start of the pandemic to stave off negative impacts on health and economy, we have been spending little by little,” said Pernia.

“And the reason for that I think is we are trying to preserve our credit rating. And so, relative to GDP and relative to population, our spending has been rather pathetic even compared to Vietnam which has a lower income per capita than the Philippines.”

He said that while the government has been conservative with spending, other countries like Malaysia and Singapore have been raising government debt in proportion to economic output while still maintaining their high credit ratings ranging between AAA up to A minus.

The Philippines, in turn, has been rated at a range of BBB up to BBB+.

“Credit rating agencies have adjusted their rating norms, owing to the pandemic and the Philippines could markedly ramp up its COVID response spending and still keep its likewise respectable credit ratings,” Pernia said.

“So the fear of being downgraded if we raise our debt-to-GDP ratio is unfounded,” he said.

Moving forward, Pernia said there is a need to increase spending to include investments that would fortify the capacity of the health system even if means taking some from the budget for infrastructure. These should include hospitals and laboratories.