Economic stimulus to make budget deficit more manageable —solon

The proposed economic stimulus package bill in the House of Representatives to help revive the economy after the COVID-19 is seen to make the fiscal deficit arising from the pandemic more manageable, an economist-legislator said Tuesday.

During the virtual press conference of the Foreign Correspondents Association of the Philippines, Marikina Representative Stella Luz Quimbo detailed the proposed Philippine Economic Stimulus Act (PESA) to help businesses and the economy as a whole recover from the health crisis.

Citing estimates from the National Economic and Development Authority, Quimbo said the country stands to lose about 10 percentage points of its potential economic growth, which is equivalent to P2 trillion.

“If we assume a fiscal multiplier of 1.5, if we divide 2 trillion by 1.5 then the amount of economic stimulus that would be needed is something P1.3 trillion,” the lawmaker said.

The PESA bill proposes a P568-billion stimulus package, while the remainder of around P800 billion will be a “credit stimulus” or monetary policy actions to boost liquidity or loanable funds in the financial system.

Without the P568-billion fiscal stimulus and off-budget financing or credit stimulus, the deficit-to-gross domestic product will be 8.13%.

With the proposed interventions, Quimbo said, “The budget deficit can even become more manageable” at more “modest rates” of around 6.47% to 7.48%.

The PESA bill proposes a P10-billion budget this year and another P10 billion in 2021 for “massive testing through local government units and agencies.”

Mass testing is aimed to alleviate a so-called “fear factor” since “without testing, workers will not go to work, consumers won’t go out...”

The measure also divides measures to address the COVID-19 crisis as “transitional,” “ financial,” “sectoral,” and “structural.”

The transitional measures include a P110-billion wage subsidies, P30 billion for cash-for-work programs, and another P15 billion for assistance to students. This is to avoid lay-offs and business closure after ECQ.

Financial interventions, meanwhile, include the creation of credit mediation and refinancing service for micro, small, and medium enterprises (MSMEs), P50 billion loans for MSMEs under the Small Business Corp., zero interest loans from state lenders Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP), and P40 billion loan guarantee from Philippine Guarantee Corp.

Sectoral interventions are targeted for critically impacted industries, such as a P10 billion assistance to MSMEs through the Department of Tourism, P58 billion assistance to tourism, P44 billion assistance to industry and service sectors through the Board of Investments, P70 billion assistance to transportation via the Department of Transportation, and P56 billion assistance to agri-fishery and condonation of loans of agrarian reform beneficiaries.

Structural interventions are designed for “sustainable and strong economic growth,” including a P25 billion funding for the National Development Co., P650 billion for enhanced “Build, Build, Build,” in three years starting 2021. —LDF, GMA News