MANILA, Philippines – The Philippines expects to go into recession, as the economy contracts due to the coronavirus outbreak and lockdowns associated with it.
Finance Secretary Carlos Dominguez III said at the late night address of President Rodrigo Duterte and key Cabinet members on Thursday, April 9: "Ngayon, itong COVID-19 has hit us in a very hard way. Ang katotohan lang, ang ating estimate natin our GDP (gross domestic product) growth will be 0% or -1%." (Now, this COVID-19 has hit us in a very hard way. To be honest, our estimated GDP growth will be 0% to -1%.)
Dominguez's latest estimate is grimmer than the Asian Development Bank's outlook for the Philippines, which expected a 2% full-year GDP growth. The World Bank's forecast was even hopeful at 3%.
Still, this is a downward turn for the Philippine economy that earlier set its eyes at a 6.5% to 7.5% GDP growth target for 2020. (READ: Coronavirus seen to make Philippines miss 2020 GDP growth target)
Bangko Sentral ng Pilipinas governor Benjamin Diokno called this slide a "technical recession" in a CNN Philippines interview, where the country will experience economic contraction due to two quarters of negative growth.
Loans, loans, loans
Dominguez also said that the budget deficit will widen from the 3.2% target to 5.3%, as the Philippines seeks for loans to fund the coronavirus war chest. (READ: What we know so far: Funding the fight vs the coronavirus)
Economic managers are targetting to raise P1.17 trillion, roughly 5 to 6% of the GDP, for coronavirus measures. This will bring the country's debt-to-GDP ratio to 47%, from last year's 41.5%, Dominguez said.
"We will continuously borrow more money to support the Philippine economy and fight against COVID-19. Right now we are tapping our friends from the ADB and World Bank and we will be borrowing around $5.6 billion from them. If this is not enough, we will go to the commercial market," Dominguez said in a mix of English and FIlipino.
The finance chief downplayed the problem in government's cash flow, saying that it's still manageable. "Our economic position is doing well so even though we have a bad luck to have this COVID-19, we are very well prepared," Dominguez said.
"Our credit rating is high, it went to BBB+, the highest ever. So we are confident that we have the financial capability to bridge this problem this COVID-19 has brought us. So we want to assure our citizens that we have the money," he said. (EXPLAINER: What's in it for us if the PH has good credit ratings?)
But he cautioned against wasteful expenditures: "We also have to realize that the money is not endless, so we need to spend it correctly, not on wasteful expenditures."
Dominguez said that the coronavirus war chest is prioritizing aid for poor families. It will be followed by help for small and medium enterprises, then support to companies.