ECONOMIC managers said the Philippines will not be significantly affected by the rising possibility of global recession since the country is not export-driven.

“With the increasing prospect of recession in the global economy, this is a real threat but our protection is that the Philippine economy is more internally demand-driven rather than externaly-demand driven,” National Economic Development Authority (NEDA) Secretary Ernesto M. Pernia said at the 2020 budget briefing conducted by the Development Budget Coordination Committee (DBCC)

NEDA, which Mr. Pernia heads, is among the DBCC members along with the Department of Finance (DoF), and Department of Budget and Management (DBM), setting official macroeconomic targets and assumptions for the government.

Finance Undersecretary and chief economist Gil S. Beltran added that Overseas Filipino Workers (OFWs) are not expected to be affected by a global slowdown since they provide “essential services” such as health, education, and domestic services.

“That’s what the numbers say, na magkakaroon ng (that there will be a) recession. The good thing about the Philippine economy is that we are not export-led, we are domestic-led,” Mr. Beltran told reporters on the sidelines of the event.

Analysts are seeing signs the US is heading for a downturn after a brief inversion in the yield curve earlier this month, a classic recession signal. The last inverted yield curve came in June 2007 when the US sub-prime mortgage crisis was breaking.

An inversion takes place when short-term bond rates are higher than long-term rates, implying greater immediate risk. The typical bond rate structure assigns higher risk to longer terms, due to the increased uncertainty inherent in longer-term debt.

The two officials also said the Philipines will be the least affected in the Association of Southeast Asian Nations (ASEAN), the leading economies of which are more export-oriented.

“We do not depend very much on exports as do other ASEAN countries,” Mr. Pernia said.

“We are not a high-flying export economy, alam mo kung sino ang worst affected? (Do you want to know who will be the worst-affected?) Korea, Singapore, Hong Kong, Thailand, ‘yan ang mga affected (those will be affected), they will collapse,” Mr. Beltran said.

However, he added that the Philippines may accommodate a wider budget deficit of up to 5% of Gross Domestic Product if the threat of a global recession requires economic stimulus.

“A 3% (deficit) is good enough, we just need to do more. [But] we won’t be affected,” Mr. Beltran said, adding: “We had 5% (deficit) in the past; during a period of crisis, the economy allows 5%,” he said.

The DBCC set a target in its July meeting of a budget deficit of up to 3.2% of GDP between 2020 and 2022.

Meanwhile, they assured that the government is speeding up infrastructure spending to stimulate economic growth and act as a buffer against the impact of a global slowdown.

“If we just do… massive infrastructure spending, which we also encourage the private sector to increase capital formation, then I think we probably be relatively unscathed at least this year in terms of possible global economic recession,” Mr. Pernia said.

Data from DBM indicates that catch-up spending by the government is currently under way following the four-month delay in passing the 2019 budget.

The government has a recorded a budget utilization rate of 93% on notice of cash allocations (NCA), using P1.153 trillion out of the P1.244 trillion cash worth of cash allocated as of July. — Beatrice M. Laforga

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