Responding to a question by House minority leader Bienvenido Abante during a hearing with the House appropriations committee, Socioeconomic Planning Secretary Ernesto Pernia said economic growth may contract next year if the government is once again forced to operate under a reenacted budget.
Michael Varcas
‘Economy may grow below 5% if budget delayed anew’
Mary Grace Padin (The Philippine Star) - August 23, 2019 - 12:00am

MANILA, Philippines — Economic growth may continue to slow down and settle below five percent next year, if Congress once again fails to approve the proposed 2020 budget on time, according to the National Economic and Development Authority (NEDA).

Responding to a question by House minority leader Bienvenido Abante during a hearing with the House appropriations committee, Socioeconomic Planning Secretary Ernesto Pernia said economic growth may contract next year if the government is once again forced to operate under a reenacted budget.

“If we would just be reenacting (the budget)...we will have a regressing economic growth performance, probably below five percent or something on that border,” Pernia said.

According to Pernia, having a reenacted budget again for next year would not be a good scenario for the Philippines, as it would hinder public spending amid a fast-growing population.

“It’s not going to be good because our population is growing fast. While population growth is lower now, in terms of absolute increases in population, it’s still quite substantial, about two million a year,” Pernia said.

“So we have many needs in infrastructure, therefore, government spending, and even private spending, the capital formation will be hampered by reenacted budget, as well. So that’s why we’re praying. We’re hoping that it’s not going to happen again,” he said.

The government was forced to operate under a reenacted budget in the first quarter of 2019, following a deadlock between the House of Representatives and Senate. The 2019 General Appropriations Act (GAA) was only enacted last April 15.

As a result, government disbursements in the first half slightly declined, while gross domestic product (GDP) growth settled at a 17-quarter low of 5.5 percent in the second quarter of the year.

“Our growth regressed, we could have achieved 6.5 percent, but we only did 5.5 percent. That’s a full one percentage point regression in the economic growth,” Pernia said.

To make up for the lower-than-expected performance, the Duterte Cabinet’s economic cluster earlier formulated a spending catch-up plan for the rest of the year.

Finance Secretary Carlos Dominguez said this strategy is expected to accelerate the implementation of projects in the second half, and enable the government to hit the GDP growth target of six to seven percent for 2019, as set by the Development Budget Coordination Committee.

Dominguez also expressed optimism that the delay in the passage of the budget would not be repeated, as both the Senate and House of Representatives committed to pass the General Appropriations Bill on time.

Meanwhile, Socioeconomic Planning undersecretary Rosemarie Edillon said the Supreme Court’s decision to adjust the computation of internal revenue allotment (IRA) is going to cost the government around P300 billion in additional expenditures starting 2022.

“We’re just flagging it as a risk (to economic growth) so we need to prepare. We are asking LGUs (local government units) to implement at least a 50 percent higher program so they have to be well prepared for it in terms of manpower, capacity,” Edillon said in an interview.

ECONOMIC GROWTH NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY
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