‘Budget delay shaves off 1 pp from Q1 GDP growth’

MANILA, Philippines — The Philippine economy could have expanded by at least one percentage point (PP)more had the passage of the 2019 General Appropriations Act (GAA) not been delayed, the country’s economic managers said.

 “By our estimations, the Philippine economy should have grown by at least one percentage point higher, at 6.6 to 7.2 percent in the first quarter, if the 2019 fiscal program had been approved on time,” the economic managers said in a joint statement Friday.

The economic team includes Finance Secretary Carlos Dominguez, Socioeconomic Planning Secretary Ernesto Pernia and Budget Acting Secretary Janet Abuel.

According to them, the budget impasse in Congress during the first three months of the year resulted in a spending cutback, which, in turn, stifled economic activity.

This forced the government to operate on a reenacted 2018 budget, and led to underspending of about P1 billion per day, or as much as P90 billion for the first quarter.

They expressed confidence that economic growth will finish stronger for the rest of the year, as the government speeds up the implementation of its Build Build Build program and as domestic consumption picks up amid easing inflation. 

The country’s GDP will need to grow at an average of 6.1 percent over the next three quarters to achieve the full-year growth target of six to seven percent.

“This target is still within reach, should the private sector sustain its current performance and government be able to jumpstart and speed up the implementation of its new programs and projects,” they said.

“Were it not for this, the economy could have received a tremendous boost from much higher state spending on infrastructure modernization and human capital development projects at the onset of 2019,” the economic managers said.

The Development Budget Coordination Committee (DBCC) in March adjusted the GDP growth target for the year from the original seven to eight percent to the six to seven percent range, in anticipation of the budget delay’s impact. 

To make up for the reduction in spending, Dominguez, Pernia and Abuel said the government will ensure the faster implementation of the government’s projects.

“We, the economic managers, remain committed to the pursuit of sustained and inclusive growth through fast implementation of the government’s programs and projects to make up for lower-than-planned state spending in the first quarter due to the delay in passage of the 2019 budget,” they said.