BSP Governor Benjamin Diokno
MANILA – Fiscal stimulus will be more effective than a monetary stimulus to date, to address any economic impact of the coronavirus disease 2019 (Covid-19) on the Philippine economy.
This was pointed out by Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno Monday at the sidelines of the launch of his four books at the Philippine International Convention Center (PICC) in Pasay City.
“We’re going to do everything to avoid a significant slowdown, meaning less than 6 (percent growth). But to me, I think, at this time, maybe the fiscal stimulus is much more effective than the monetary stimulus because if you’re going to stay home, you will not spend money so there’s less stimulus from that,” he said.
Last year, the Philippine economy failed to hit the government’s 6-6.5 percent target band after expanding by only 5.9 percent due to the impact of the delay in the approval of last year’s national budget.
This year, economic officials are confident of faster domestic expansion given the timely approval of the national budget and the implementation of programs that were not funded on time last year.
Diokno said the government’s infrastructure program, the Build, Build, Build program, will be more effective to counter any impact of Covid-19 on domestic growth.
Under this program, the government will increase infrastructure investments to about PHP1 trillion annually to put in place necessary projects that will have a more long-term impact on the economy.
Earlier, Diokno said they were projecting Covid-19’s hit on domestic growth to average at 0.3 percent in the first half of the year, with the impact placed at 0.2 percent in the first quarter and 0.4 percent in the second quarter.
He said monetary officials have slashed key policy rates by 25 basis points so far this year, and he is committed to his earlier statement of a 50-basis-point rate cut this year to help boost domestic growth.
Philippine monetary officials are expected to finish their study on the impact of Covid-19 on the economy around April, he said, adding “to give (us) time to assess the situation.”
Asked on the impact of the increasing number of overseas Filipino workers (OFWs) who are infected by the virus, Diokno said they are still monitoring the developments.
“We are evaluating. Maybe on a weekly basis, we are doing it. We’re ready to report to DBCC (Development Budget Coordination Committee) maybe around April,” he said.
Diokno said there are other measures that the government should implement to counter any impact of Covid-19, and these include improving the ease of doing business.
“These are the things that we need to do with or without the Covid-19 virus. Let’s do it now while the whole world is in shamble so that, as I said, when things recover then, we will be stronger,” he added.
During the same event, Socioeconomic Planning Secretary and National Economic and Development Authority (NEDA) Director General Ernesto Pernia said the government may increase spending to counter any impact of Covid-19.
He said the higher spending may increase the budget deficit from the 3.2 percent of gross domestic product (GDP) target to around 3.3-3.5 percent of GDP.
Pernia added impact of the epidemic on domestic growth may be around 0.3-1.0 percentage point of this year’s 6.5-7.5 percent target.
Asked for the possibility of growth hitting the higher-end of the government’s target band, he said, this will need “a lot of prayers because there are so many disturbances.” (PNA)
