Philippines Finance Secretary Carlos Dominguez said the best-case scenario for the economy this year is zero growth, while the government’s massive spending to fight the pandemic will bloat the budget deficit.

Gross domestic product could shrink by as much as 1% — its first contraction in more than two decades — while the budget deficit may widen to 5.3% of GDP, from a target of 3.2% last year, Mr. Dominguez said in a televised briefing alongside President Rodrigo Duterte and other officials.

“COVID-19 has hit us in a very hard way,” Mr. Dominguez said. Mr. Duterte, whose term ends in 2022, said he expects the virus and its aftermath to last for two years.

The Philippines has lined up some P1.17 trillion ($23 billion) to fight the coronavirus outbreak, including P830 billion from central bank actions, said Mr. Dominguez, who is a member of the bank’s monetary board. To fund the deficit, the government will borrow $5.6 billion from agencies including the Asian Development Bank and World Bank, then tap the overseas bond market, he said.

“We are confident we have the financial capability to bridge this problem,” the finance secretary said. “The program is to spend, first, to help the poorest families, and then to help the small and medium enterprises, and then to provide support for the companies that are supported by their banks.”

The number of confirmed virus cases in the Philippines had risen to 3,870, with 182 fatalities, as of Wednesday.

Mr. Duterte has placed the main island of Luzon — which is home to 60 million people and accounts for 70% of the Philippine economy — on lockdown since mid-March, shuttering hundreds of factories and businesses until the end of April.

The president has pledged to sell government assets to raise funds if needed. The government may have to raise taxes in the next year or two, Mr. Dominguez told CNBC on Wednesday.

Treasurer Rosalia de Leon said the government has “built sufficient funding buffers” to handle the current crisis, citing a record 310.8 billion peso retail bond sale in February.

“We remain agile for good opportunities to further bolster our war chest,” she said in a text message. – Bloomberg