Govt seen spending more if economy stays in recession — Fitch Ratings

THE national government may have to spend more than it planned against the coronavirus disease 2019 (Covid-19) pandemic if the economy remains in recession next year, Fitch Ratings warned on Tuesday.

In a statement, the credit ratings agency pointed out that the government’s record of macroeconomic management “lends credibility” to the projections it laid out in the proposed 2021 national budget.

President Rodrigo Duterte approved in July the proposed P4.50 trillion national budget for 2021, which is equivalent to 21.8 percent of the country’s gross domestic product (GDP), and 9.9 percent higher than this year’s P4.10-trillion appropriations.

According to the Department of Budget and Management, 2021 budget aims to sustain government efforts towards effectively responding to the Covid-19 pandemic by focusing on government spending on improving the healthcare systems, ensuring food security, increasing investments in public and digital infrastructure, and helping communities cope and prevail during the crisis.

However, Fitch said “curtailing pandemic-related spending may be difficult if the economy continues to contract and fails to recover as fast as the authorities expect; indeed, if the recovery stalls, there may be pressure for even more fiscal stimulus.”

To recall, the inter-agency Development Budget Coordination Committee announced that government disbursements were expected to increase to P4.47 trillion, or 21.6 percent of GDP in 2021.

Source: TheManila Times