‘WIDER BUDGET DEFICIT WILL BOOST ECONOMY’
AN economist-lawmaker wants the government to widen its budget deficit up to nearly 8 percent of GDP as the government needs to implement fiscal programs to keep the economy afloat following the impact of Covid-19 pandemic.
In his 109-page Philippine National Stimulus Strategy report to be submitted to the Palace, House Committee on Ways and Means Chairman Joey Sarte Salceda said widening the budget deficit to 7.8 percent of GDP would result in a 1.3-percent growth for the economy this year, apparently averting the first contraction of the economy in 18 years.
Allowing for a wider budget deficit is also supported by a senior senator and former director general of the National Economic and Development Authority (Neda). In a text message to the Businessmirror, Senate President Pro Tempore Ralph Recto said: “We can afford 10 percent GDP deficit for the next two to three years. But we have to act fast. Test, isolate, treat. Allow those who are immune and negative to start working. Slowly allow businesses to operate. Provide longterm interest free loans to MSME [medium small micro enterprises], and reduce taxes.”
A budget deficit occurs when expenditures exceed revenues.
However, Salceda said the government should maintain its focus on deficit spending until 2022 so that the government could quickly recover from the slump.
Citing his estimates, Salceda said the government needs to widen its budget deficit to 7.4 percent of GDP by 2021 and 5.2 percent of GDP by 2022. These would be way above the economic managers’ projections in December last year at 3.2 percent for the said years.
This, the lawmaker said, would result in economic growth of 4.5 percent and 6.0 percent of GDP, respectively.
Should the government decide to minimize its deficit this year, Salceda estimates that the economy would indeed contract by 0.3 percent this year even if they widen the budget to 5.8 percent of GDP.
By 2021, he said a 5-percent deficit-to-gdp ratio would yield an economic growth of only 2.5 percent, while a 3.5-percent deficit-togdp ratio would result in growth of 5.5 percent by 2022.
“Given the choice between spending measures and tax relief, spending is preferable,” he said.
“Spending can boost GDP, and therefore arrest the decline in revenue; tax cuts are hard to roll back,” Salceda added.
Special hearing
MEANWHILE, Speaker Alan Peter Cayetano said the lower chamber will hold a special hearing on Tuesday to tackle the fiscal stimulus plan to help the government deal with the impact of Covid-19.
In an FB live session, Cayetano said the House Economic Stimulus Response Package Cluster will lead the hearing, which will be conducted through a video conferencing platform.
“We will have a modified hearing with our economic stimulus cluster. The executives would talk first, then our three lawmakers, Rep. Joey Salceda, Rep. Sharon Garin and Rep. Stella Quimbo would present their proposals,” Cayetano said. Salceda is a co-chairman of the House Economic Stimulus Response Package Cluster.
Salceda is proposing a P169.9billion “Filipino Families First” stimulus plan to encourage families and businesses to comply with public health measures and to speed up economic recovery after the crisis.
He also proposed to President Duterte a P45-billion wage subsidy scheme to cover 5.98 million workers for small and medium enterprises, sole entrepreneurs and freelancers affected by the implementation of the six-week ECQ.
Quimbo’s proposal, meanwhile, seeks to allocate P108 billion for a fiscal stimulus package to cushion the pandemic’s impact on the economy.
Under the proposed Economic Rescue Plan for Covid-19, the fiscal stimulus package shall be broken down as follows: P43 billion for assistance and promotion of the tourism sector, P15 billion for unemployment assistance, and P50 billion for assistance for business, particularly micro, small, and medium enterprises, which includes loan packages and subsidies.