DOF readies stimulus package in case of Eurozone contagion

MANILA, Philippines - The Aquino administration will be ready with a fiscal stimulus package in the event that a contagion from the Eurozone erupts, Finance undersecretary Rosalia de Leon said.

Additional spending will be necessary to help stimulate the economy should a contagion in the Eurozone affect Asian countries such as the Philippines.

In the event that the debt crisis in Europe escalates, De Leon said, Philippine exporters may be affected through higher borrowing cost. Some European banks, she said, may find it difficult to extend credit lines to some of these private exporters.

However, De Leon stressed that there’s no reason to worry just yet.

The Philippines would, nonetheless, be ready in case there’s a need to cushion the economy from a possible debt contagion from Europe, she said.

“A government stimulus will be important to accelerate spending,” De Leon told The STAR.

The high level of liquidity in the domestic market needs to be sustained as well as the strong economic growth recorded in the first quarter of the year, she said.

The Philippine economy, as measured by gross domestic product (GDP), grew 6.4 percent in the first quarter of the year, surpassing analysts’ expectations and beating year-ago figures of 4.9 percent.

The government is aiming to grow the economy by a range of five to six percent this year ,but external developments in Europe pose threats to growth.

A debt crisis is simmering in the Eurozone, sending jitters to banks and investors on sovereign finances.

Debt-saddled Greece wants to leave the euro, a move that could affect the credit ratings of other European countries such as Cyprus, Portugal, Ireland, Italy and Spain, said global debt watcher Moody’s Investors Service.

Moody’s also said that a Greek exit from the euro could pose a threat to the currency’s existence.

It also means Greece is going to default on its debt and leave the European banking system saddled with debts.

A crisis could scare off investors who are expected to shy away from other neighboring countries such as Spain, Portugal and Italy.