Government allots P100 billion for stimulus plan

MANILA, Philippines - The government is spending P100 billion this year to pump prime the economy that was battered by the full impact of the global economic crisis last year, Finance Secretary Margarito Teves said yesterday.

Teves told participants of the forum hosted by the Asian Development Bank (ADB) yesterday that the funds for stimulus spending this year had already been incorporated in the 2010 budget that was signed into law by President Arroyo last Feb. 9.

“The Philippines will be spending P100 billion for stimulus projects for 2010,” Teves said. 

He added that the government would not resort to additional borrowings to finance the pump priming activity.

The DOF chief told reporters that the additional spending would be concentrated on major infrastructure projects such as telecommunications, power, and water.

Last Feb. 9, President Arroyo signed the P1.54-trillion national budget for 2010. This year’s approved budget was eight percent or P115 billion higher than last year’s P1.426- trillion budget.

The Department of Education (DepEd) got a share of P174. 9 billion followed by the Department of Public Works and Highways (DPWH) with P135.6 billion, Department of the Interior and Local Government (DILG) with P66.45 billion, the Department of National Defense (DND) with P57.84 billion, and the Department of Agriculture (DA) with P41.17 billion.

The Arroyo administration implemented a P330-billion Economic Resiliency Plan (ERP) last year to cushion the impact of the global economic crisis. This year’s budget for the stimulus program was less than a third of the amount spent last year.

The stimulus spending coupled with weak tax collections brought about by the slackening domestic output translated to a record budget deficit of P298.5 billion or 3.9 percent of gross domestic product (GDP) last year from P68.1 billion or 0.9 percent of GDP in 2009. The domestic output as measured by the GDP eased to 0.9 percent last year from 3.8 percent in 2009.

This year, the government hopes to trim the budget deficit to P293 billion or 3.5 percent of GDP as it expects the GDP to expand between 2.6 percent and 3.6 percent.

Teves told reporters that it is not yet clear whether the Philippines would have to continue spending more next year to boost domestic activity.

“We’re hoping the world recovery will be strong enough that the stimulus program that we had in 2009 and and in some extent in 2010 will not be needed as they were in those two years,” he stressed.

Economic managers are set to unwind its fiscal and monetary stimulus measures with the improving domestic economy.

“We don’t know yet whether an exit strategy is in order after 2010,” Teves added.

On the other hand, monetary authorities continued to phase out liquidity enhancing measures due to clearer signs of increasing momentum in economic recovery. The Bangko Sentral ng Pilipinas (BSP), however, kept its key policy rates unchanged at record lows.

The BSP’s Monetary Board slashed its key policy rates by 200 basis points between December of 2008 and July of 2009 as part of its accommodative stance to cushion the impact of the global financial crisis on the domestic economy.

However, it has phased out several crisis-related measures including the reduction of the peso rediscounting budget to P40 billion from P60 billion as well as the restoration of the loan value of all eligible rediscounting papers to 80 percent from 90 percent of the borrowing bank’s credit instrument.