RCBC chief economist Michael Ricafort
MANILA – Inclusion of more people in the priority groups of the government’s coronavirus disease 2019 (Covid-19) vaccination program is expected to boost gains from the reopening of the economy and help increase state revenues.
In a report on Tuesday, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said if daily Covid-19 cases are effectively reduced with the vaccine rollout and inclusion of more beneficiaries, such as the economic front-liners and indigents, any additional moves to reopen the economy could help alleviate tax revenue collections in the coming months.
Ricafort said continued easing of movement restrictions would allow for more economic activities that will increase the government’s capacity to collect taxes.
He added reopening of the economy would allow more companies to operate thus, reducing the need for the government to provide subsidies and help boost its fiscal management and discipline.
“However, this could be offset by the risk of relatively slower economic recovery/rebound amid the risk of relatively higher new Covid-19 cases locally amid new coronavirus variants that are more contagious that could lead to risks of lockdowns and travel restrictions…,” he said.
This could still potentially result in reduced tax revenue collections and could lead to relatively wider budget deficits with reduced government revenues vis-a-vis the need to increase government spending for various Covid-19 programs, he added.
With these factors, Ricafort underscored the need for a delicate balance between stimulating economic growth and sustaining fiscal management performance in terms of maintaining the country’s favorable credit ratings to help lower borrowing costs and improve financing terms for the country.
He said favorable credit ratings increase the availability of loans from a bigger roster of international creditors/investors, especially in financing various Covid-19 programs as well as for various economic recovery programs from Covid-19.
“Hopefully, new Covid-19 cases would ease further with the continued increase in Covid-19 vaccine arrivals and rollouts, thereby would help justify reopening of the economy, while also considering the capacity of the healthcare system,” he added. (PNA)
