By Melissa Luz T. Lopez
STATE ECONOMIC MANAGERS on Wednesday slashed gross domestic product (GDP) expansion targets for this year and 2020, citing 2019 constraints from the delayed enactment of the national budget that will make it “very difficult” to catch up with spending which, in turn, could even push growth to an eight-year low.
The inter-agency Development Budget Coordination Committee slashed its 2019 GDP growth forecast to 6-7% from 7-8% originally as the government operates on a reenacted budget.
“In reality, you’ll have to take into consideration the weather conditions in the latter half of the year. No matter how much you want to fast-track it, if the rains are heavy, you just can’t catch up… it will be very difficult,” Finance Secretary Carlos G. Dominguez III said during a press briefing after Wednesday’s meeting.
The government expects to spend P3.78 trillion this year, lower than the P3.833 trillion estimate back in October. The DBCC also scaled down the revenue goal to P3.15 trillion from P3.208 trillion previously. Of this, P162.2 billion will be generated by Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) Act.
The deficit is projected to settle at P631.5 billion, equivalent of 3.2% of GDP. The fiscal gap is seen narrowing to three percent of GDP yearly from 2020 to 2022.
In a separate statement, the National Economic and Development Authority (NEDA) said growth could slide to as low as 4.2% if the new spending plan is not passed at all.
Lawmakers remain in deadlock over details of the P3.757-trillion spending plan, with the Senate accusing the House of Representatives of making last-minute adjustments to the ratified budget measure, after a meeting of leaders of both legislative chambers with President Rodrigo R. Duterte last Tuesday night failed to resolve their differences.
The government is currently operating on a reenacted 2018 budget, which leaves new programs and even big-ticket infrastructure projects unfunded.
Socioeconomic Planning Secretary Ernesto M. Pernia said a reenacted budget until April could drag full-year growth to 6.1-6.3%, far from the state’s original target, likely matching 2018’s 6.2% pace.
If the budget is enacted in August — as Sen. Panfilo M. Lacson had warned — GDP growth could slide to just 4.9-5.1%.
“The government would not be able to quickly execute programs and projects. This means that we will miss the opportunity to create as much as 180,000-240,000 more jobs, and fail to lift as much as 400,000-550,000 more Filipinos out of poverty this year,” Mr. Pernia was quoted as saying in a statement.
If realized, this would be the slowest growth pace since 2011, when the economy expanded by just 3.7%.
The estimates factor in delays in the implementation of new and ongoing infrastructure projects, as well as in delivery of social services like the unconditional cash transfers for 10 million poorest households as well as fuel subsidies for jeepney drivers as provided under the TRAIN law.
A reenacted budget also leaves the next tranche of salary increases for government workers unfunded.
Janet B. Abuel, officer-in-charge of the Department of Budget and Management, also noted that growth could scale back by up to 2.8 percentage points if the budget were reenacted for the entire 2019.
“We therefore urge Congress to transmit the 2019 national budget at the soonest possible time to Malacañang so the government can sustain its investments on development priorities, namely public infrastructure and social services,” Ms. Abuel added.
“The longer the budget impasse lasts, the larger the adverse effect to the Philippine economy and its people.”
The DBCC sees GDP growth picking up to 6.5-7.5% in 2020 — against an initial 7-8% projection — before rising to 7-8% in 2021 and 2022.
The economic team also maintained inflation forecasts at 3-4% this year and 2-4% annually until 2022, confident that price increases will go back to normal from last year’s surge. The estimate for the peso-dollar exchange rate was retained at P52-55.
Dubai oil prices are seen at $60-75 per barrel for the next four years.
The DBCC raised its forecast for the 364-day Treasury bill rate to 5.5-6.5% this year from 4.5-5.5% previously, while the London interbank rate was cut to 2.5-3.5% from 3.0-3.5% previously.
Other risks factored into the forecasts include a “mild” El Niño phenomenon, as well as unresolved trade tensions between the United States and China.
Meanwhile, Mr. Dominguez mentioned that the current water supply problem in Metro Manila would have been “much less serious” had the government pursued the construction of the Kaliwa dam, a project first proposed 34 years ago meant to satisfy increased water needs of Metro Manila, Cavite, Rizal and Bulacan.
A Chinese contractor is set to build the P12.1-billion dam project that is scheduled to be completed by 2022.