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Philippines readies P180-B economic stimulus

The Philippines is ready to spend P140 billion for an economic stimulus plan this year, which the Department of Finance (DOF) said could be increased to P180 billion should the pending tax reform package be enacted into law.

In a statement on Sunday, the DOF said the latest figure covers the funding for both the response to the coronavirus pandemic and the economic recovery program, sufficient for both 2020 and 2021.

According to Finance Secretary Carlos Dominguez III, the government is ready to spend P140 billion, while another P40 billion in tax credits will come from the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill.

"This number was arrived at to keep our fiscal deficit in a manageable zone," he said.

The CREATE bill is the recalibrated version of the government's comprehensive tax reform program (CTRP), in light of the COVID-19 pandemic.

Previously known as the Corporate Income Tax and Incentives Reform Act (CITIRA), the measure aims to immediately impose a 5 percentage point cut in the corporate income tax (CIT) rate.

The P180-billion stimulus also includes injecting P50 billion into the banking system, which the DOF said will have a multiplier effect of between 8 to 10 times, or about P400-billion worth of economic activity.

Some P5 billion will also go to a credit guarantee program for distressed businesses, which has a multiplier effect of around 20 times, or about P100-billion worth of economic activity generated by the private sector.

"As we said, whatever stimulus package we have, it has to be affordable and it has to recognize the fact that this [novel coronavirus] may not be defeated by the end of this year," said Dominguez.

Dominguez said last week the Philippines will sustain its P3-trillion borrowing program next year, the bulk of which will be financed from local sources.

"So we have to keep, as they say, we have to keep our powder dry for next year as well," he said.

The Philippine Statistics Authority (PSA) earlier in the day reported the second-quarter gross domestic product (GDP) at -16.5 percent, the worst on record, bringing the country to a technical recession.

Economic managers said, however, that the worst is now over for the Philippines as recovery is likely in the succeeding quarters following the easing of lockdown restrictions. — DVM, GMA News