ING Bank Manila senior economist Nicholas Mapa said their 9.9-percent contraction forecast for the Philippine economy this year remains.
This projection is higher than the government’s 5.5% target economic contraction for this year due to the Covid-19 pandemic.
Mapa said that despite noted “bounce in most economic indicators from the lows in April, we continue to expect the Philippine economy to remain in recession for at least the balance of 2020 as consumption and capital formation remain sidelined by double digit unemployment and as Covid-19 new daily infections keep consumers indoors.”
Mapa predicted that state spending, which was the main driver of the gross domestic product (GDP) in the second quarter, “will likely ease in the second half of the year as government officials pull back on spending to protect fiscal targets.”
The country’s GDP shrank by 16.5% in the second quarter this year resulting from the imposition of stringent community quarantines from mid-March to the end of April for Luzon, and until end-May for Metro Manila.
The quarantines only allowed people from select sectors like medical workers and food business, among others, to go out of their homes which constricted economic activities in Luzon, which accounts for some 70% of the annual GDP.
The government increased spending, especially for social protection programs, to address the quarantine’s impact on the economy as well as the vulnerable sectors including the poor and small businesses.
Records show government spending rose 108.14% year-on-year last April to P461.7 billion, 12.38% last May, 26.65% last June, and 10.40% last July.
Bureau of the Treasury (BTr) figures released recently indicate that revenues for August contracted by 13.05% to P243.2 billion, while expenditures rose by 0.38 percent to P282.3 billion. This expanded the budget gap by 1,510.61% to P40.1 billion.
Related records show there was 7.67% decline in annual revenue to P1.931 trillion, while expenditures increased by 20.79%, and budget deficit by 515.03% to P740.7 billion.
The government has thus revised its 2020 revenue target to P2.52 trillion, and spending target is P4.34 trillion, clearly showing a huge gap.