MANILA (UPDATE)-- Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Monday the Philippines would need a supplemental budget "very badly" to build the new economy borne out of the COVID-19 pandemic.
The supplemental budget must focus on job creation and will be on top of realignments to the 2020 national budget, which was spent on cash aid and social services, Diokno said.
"Monetary policy is not the only game in town. We need a strong fiscal stimulus, what gets in the way is the absence of a supplemental budget," he told ANC's Market Edge.
Diokno cut the benchmark interest rate by 125 basis points so far this year, 100 of which was delivered during the lockdown. He slashed 200 basis points off banks' reserve requirement ratio, with authority to cut it by another 200 points.
"We need a supplemental budget very badly and the focus should be on job-creation activities, that should be the focus of the supplemental budget," he said.
The Philippines needs to be "very careful" in the design of the new economy, to provide support for sectors that will emerge and thrive in it, he said.
"We have to have an idea of how the new economy will look like. The economy will change drastically. The new economy will be much, much different. It has to be safer. It has to be better and it has to be tech savvy," he said.
Gross domestic product unexpectedly shrank by 0.2 percent in the January to March period, with just 2 weeks spent under lockdown that is scheduled to end on May 15.
The succeeding two quarters are expected to be worse before a rebound in the last 3 months of the year, analysts said, with the Philippines headed for a recession or at least 2 successive quarters of negative growth.
"We expect the economy to go deeper in the second quarter because of the full effect of the lockdown," Diokno said.
Diokno debunked as "not likely" forecasts that the economy could contract by up to 10 percent. "There will be a strong recovery in the fourth quarter, assuming there's no second wave," he said.
The Bangko Sentral will gauge the effect of recent policy actions before deciding on the deployment of the 200-point cut in the RRR or further reductions in the overnight borrowing rate, he said.
'NOT IN THE NEAR FUTURE'
Malacañang said asking Congress for a supplemental budget was unlikely in the "near future" with the administration still looking at funds that it could realign for pandemic response.
Budget Secretary Wendel Avisado is expected to submit this week a report on funds that the government can tap, said Presidential Spokesman Harry Roque.
"Kung ang determination po ay despite the power to realign ay mayroon pa rin kakailanganing pondo dahil hindi natin alam kung kailan matatapos itong COVID-19, sigurado pong maghahanda sila ng supplemental budget. Pero wala pa po iyan in the near future," Roque said.
(If despite the power to realign, we will still need more funds because of the COVID-19 pandemic, the surely a supplemental budget will be prepared. But that's not in the near future.)