Gov't eyes fiscal bazooka as biz groups call for 'massive' COVID-19 response

MANILA, Philippines — The Duterte administration is cooking up a bigger fiscal stimulus that aims to blunt the economic pain from the coronavirus disease-2019 (COVID-19), a much-anticipated move that businesses and investors have called for as the outbreak is foreseen to drag on for months.

Finance Assistant Secretary Ma. Teresa Habitan told Philstar.com the economic managers are discussing a second package of economic programs that would augment the initial P27.1-billion support announced this week, which investors deemed too small for the massive damage caused by the outbreak, and the drastic government response to it.

“We are scouring for funds now. We are looking at idle funds from government corporations and other agencies that have not been disbursed and essentially telling them to spend it already,” Habitan said in a phone interview.

While she declined to provide more details, Habitan said “to just wait” as the economic team, led by Finance Secretary Carlos Dominguez III, prepares the economic response to the outbreak and the disruptions caused by the month-long Luzon community quarantine.

It appears though that a key portion of the larger package being discussed are idle funds from state corporations and institutions. The Governance Commission on GOCCs, which oversees state companies, said it is on standby for further orders on fund deployment. "All GOCCs are tasked to follow and adhere to the policy direction of their supervising departmetns in terms of mobilizing funds," the agency said in a statement.

An announcement of a massive fiscal push would be most welcomed by battered markets and investors wary the government is not doing enough to arrest what can only be a certain economic slowdown. Socioeconomic Planning Secretary Ernesto Pernia rejected an economic contraction in a text message, while Dominguez assured the public money is available if needed.

“The initial package (is) assuming that the contagion will end shortly after mid-year” the finance chief said in a separate text message on Tuesday.

“Other measures will be considered together with the private sector as the effects of the contagion become evident,” he added.

Business groups call for P277-billion package

The outbreak itself, and its impact, came at a wrong time for the government’s budget ambitions, which ultimately include achieving a coveted “A” rating from debt watchers like Fitch Ratings and S&P Ratings.

Less than a month ago before the global pandemic hit, that “A” dream seemed to be within reach after Fitch painted a positive outlook on the country’s BBB rating, indicating an upgrade could be looming over the next 24 months.

This time, 32 business groups essentially want the government to abandon its credit rating goals for now, in exchange for a big-time fiscal support amounting to P277 billion, which would fund programs to help the economy bounce back from the damage caused by COVID-19.

As the economy is expected to slow this year, the groups, which include the Makati Business Club and the Philippine Chamber of Commerce and Industry, said a stimulus of that amount can push the budget deficit up to 5% of gross domestic product (GDP) under a scenario of 3% GDP growth.

If realized, an annual deficit at that level would be the highest since the restoration of democracy in 1986, but business leaders are not concerned, saying debt watchers are likely to “relax” their standards, while the country’s debts are also likely to remain sustainable.

“This massive stimulus will save lives and protect our society but will not trigger alarm bells in the credit rating and global investment community as the Philippine debt/GDP measure is only likely to rise from 41.5% to 44.2%. It was almost 70% about 15 years ago,” they said in a joint statement.

“To mitigate the suffering of Filipinos and reduce damage to the society and economy, we urge Congress, in coordination with the administration, to commit to a more forceful action on the fiscal front,” the business groups said.

Apart from the P27.1-billion economic package funded by the 2020 budget, a P1.65-billion supplemental budget for the Department of Health to address COVID-19 is also pending before Congress. There is also House Bill 6606 authored by Marikina Rep. Stella Luz Quimbo, who is calling for a P108-billion economic rescue plan.

Both measures are still pending at the Lower House and would likely be tackled during a special session of Congress which President Duterte is said to be calling soon.

The central bank has also deployed support, cutting key rates by 50 basis points on Thursday to force lenders to lower their interest rates, encourage more borrowing from consumers and investors, and thereby boost economic activity.

“The onus is now on the fiscal side,” the business groups said.

“The administration and the DOF have done a great job improving the country’s finances. Now is the most critical time to put it in service of the sovereign people,” they added.

Apart from MBC and PCCI, the 32 groups that signed the joint statement were:

• Association of the Filipino Franchisers Inc.
• Employers Confederation of the Philippines
• Federation of the Filipino Chinese chamber of Commerce and Industry Inc.
• Foundation for Economic Freedom
• Federation of Indian Chambers of Commerce (Phil.) Inc.
• Philippine Center for Entrepreneurship/Go Negosyo
• IT & Business Process Association of the Philippines (IBPAP)
• Institute of Corporate Directors
• Investment House Association of the Philippines
• Institute for Solidarity in Asia
• Management Association of the Philippines
• Philippine Association of Local Service Contractors, Inc.
• Philippine Franchise Association
• PHILEXPORT
• Philippine Institute of Certified Public Accountants
• Philippine Retail Association
• Semiconductor and Electronics Industries on the Philippines, Inc.
• Shareholders’ Association of the Philippines
• Bankers Association of the Philippines
• Rural Bankers Association of the Philippines
• Chamber of Thrift Banks
• Microfinance Council of the Philippines
• American Chamber of Commerce of the Philippines
• Australian-New Zealand Chamber of Commerce Philippines
• The Canadian Chamber of Commerce of the Philippines
• French Chamber of Commerce and Industry in the Philippines
• European Chamber of Commerce of the Philippines
• German-Philippine Chamber of Commerce and Industry, Inc.
• Philippine Association of Multinational Companies Regional Headquarters, Inc.