The Philippines’ fiscal response is on track to support the economy, but the government needs to address the stagnant consumer confidence that places a drag on the pace of the nation’s recovery, the Department of Finance (DOF) said.
Finance Secretary Carlos G. Dominguez III said the country’s economic recovery does not hinge on the amount of the government’s fiscal response to the coronavirus pandemic, but on people’s confidence to spend.
Dominguez explained “no matter how much fiscal response you have, if people don’t have confidence of going out and spending, it’s not really going to work.”
President Duterte’s chief economic manager has been bucking calls for additional stimulus spending to fight the nation’s worst economic crisis in recent history. Instead, Dominguez opted for a prudent spending approach.
The government’s economic team does not want to allow the budget deficit to exceed more than 9.0 percent of the economy this year, which is the median of its neighbors and other emerging markets’ fiscal gaps.
“We are really facing a problem of people’s confidence in the system,” Dominguez told reporters during the virtual briefing on the second-semester 2020 Financial Stability Report. “At this point, the fiscal response is definitely on track.”
The local economy, as measured by the country’s gross domestic product (GDP), shrank by 11.5 percent in the third-quarter, worse than the 9.8 percent contraction projected by analysts polled by Reuters, but softer than 16.9 percent in the previous quarter.
“We are focusing on increasing people’s confidence, and that is a matter that is really of importance to the government,” the finance chief said.
“Essentially, we are looking at increasing people’s confidence in not getting sick, and making sure that they understand that the health infrastructure of the government can support, whoever gets sick,” he added.
Currently, the country’s hospital beds for COVID-19 cases are only about less than 40 percent occupied, Dominguez said, noting “we are very well in place to support whatever spike, or additional sickness, that can occur.”
Dominguez also added that infection rate in the country is “very generally low” in the recent weeks.
In Metro Manila, the country’s main economic hub, the COVID-19 testing positivity rate further declined to 4.0 percent from 5.0 percent, the latest monitoring report by OCTA Research showed.
The World Health Organization recommends that the positivity rate should remain below five percent.