PH economy to contract by up to 3.4%, higher debt seen in 2020

Ralf Rivas
Weak growth and higher spending due to the coronavirus crisis are expected to bloat the Philippines' budget deficit for 2020

PANDEMIC. A Cebu City resident is tested for the coronavirus. Photo by Gelo Litonjua/Rappler

MANILA, Philippines – The Philippine economy is seen to contract by 2% to 3.4% in 2020 due to the coronavirus crisis, a crash not seen since the Marcos regime.

The Development Budget Coordination Committee (DBCC) said on Wednesday, May 13, that the pandemic’s impact on the economy could reach P2 trillion or around 9.4% of gross domestic product (GDP).

While the country is diving into a recession in 2020, growth for 2021 is seen to soar by 7.1% to 8.1%, assuming that a well-targeted recovery program, alongside efforts of the private sector, would mitigate the pandemic’s impact.

Revenue collection for this year has been revised to P2.6 trillion or 13.6% of GDP, lower by 17.7% than the earlier assumption of P3.17 trillion approved by the DBCC last March.

Disbursements are estimated to reach P4.18 trillion, 21.7% of GDP. This slightly exceeds the program approved in March by P12 billion or 0.3% of GDP.

The revised disbursement program takes into account the releases for COVID-19 initiatives charged to savings coming from austerity measures, among others.

With the revised revenue and disbursement programs, the budget deficit for 2020 is projected to reach P1.56 trillion or 8.1% of GDP. This is 2.8 percentage points higher than the initial estimate of 5.3% of GDP announced last March. (READ: What we know so far: Funding the fight vs coronavirus)

“The DBCC maintains that the debt level remains manageable, especially as the Philippines enjoyed its lowest recorded debt-to-GDP ratio of 39.6% last year,” the DBCC said.

Debt-to-GDP ratio is expected to hit around 50%, still lower than the peak of 71.6% in 2004.

Trade figures were also adjusted downward to reflect the global economy’s sharp decline. Philippine imports and exports are seen to shrink by 4% and 5%, respectively.

For 2021 to 2022, export growth is expected to recover to 5%, while imports are projected to bounce back to 8%. –

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.