‘COVID impact worse than expected’

by Mary Grace Padin (The Philippine Star), 7 May 2020

MANILA, Philippines — The impact of the coronavirus disease 2019 or COVID-19 pandemic on the economy may be worse than previously expected following the extension of the enhanced community quarantine and the imposition of general community quarantine in areas affected by the contagion, the Department of Finance (DOF) said yesterday.

In a press briefing, Finance Secretary Carlos Dominguez said the country’s gross domestic product (GDP) growth this year may settle even lower than the previous projection of zero to negative 0.8 percent.

“Might be,” Dominguez said when asked if the pandemic’s impact might be worse than previously projected. “Because we are monitoring reports from other countries and it looks like there is no magic medicine for this thing.”

The finance chief also said that Luzon, including Metro Manila which is currently under a tighter lockdown, accounts for over 60 percent of the country’s GDP.

“The reason we’re being careful (with the easing of the lockdown) is because we don’t want a relapse. Because the relapse could be worse and we’ve seen it in other countries who relaxed a bit too early. Their lockdown is even harder now. So I want to make sure that we are really clear before we do a more serious relaxation,” he said.

Still, Dominguez expressed confidence that the first quarter economic performance would still be “more positive than negative.”

“I don’t have a number, but January looks okay, until we had a minor problem with Taal Volcano. And then starting late February there was the curtailment of tourists from China and in mid-March, there was the shutdown,” Dominguez said.

“When we calculate it, it’s more positive than negative because the curtailment was less than one half of the quarter,” he said.

On the other hand, he said the GDP figures for the second quarter would be “quite bad.”

The government’s economic team earlier projected that the economy may contract to zero percent, or even contract by 0.8 percent due to the impact of the pandemic.

Economic managers also estimate that the country’s fiscal deficit may widen to as much as 5.3 percent of gross domestic product.

Nevertheless, Dominguez reiterated that the Philippines is in a good financial position to respond to COVID-19, thanks to the policies implemented by the Duterte administration.

He cited the assessment made by the London-based publication, The Economist, which ranked the Philippines 6th among 66 emerging market economies in facing the COVID-19 pandemic.

“That, I think, should assure people that we are very well capable of meeting the financial requirements of this COVID hit,” Dominguez said.

On top of having ample fiscal headroom, Dominguez said the Philippines also has a strong monetary position.

“Our total foreign reserves are more than our total debt. That’s why you’ve noticed that peso is the least depreciated among the ASEAN countries and in Asia. I think we are only second to Japan,” he said.