PH GDP likely grew 6%-7% in 2014, says Abad
MANILA, Philippines—The Philippine economy likely expanded 6-7 percent in 2014, a range whose lower end was below-target, mainly on the back of anemic government spending, Budget Secretary Florencio B. Abad said on Wednesday.
Following the Cabinet-level Development Budget Coordination Committee (DBCC) meeting, Abad also told reporters that while the country’s economic managers had decided to keep the gross domestic product (GDP) growth target for this year at 7-8 percent, the 2016 goal was cut to a similar 7-8 percent expansion from the previous projection of 7.5-8.5 percent.
While domestic prospects remain rosy for 2015, external challenges brought about by the big drop in global oil prices as well as slower economies of trading partners such as China, Europe and Japan pose risks to sustaining robust growth until the end of the Aquino administration. “We do have challenges that we need to deal with, some beyond our control,” Abad said.
For one, the “dramatic decrease” in oil prices would impact on the revenue collections of the Bureau of Customs (BOC), the budget secretary said.
BOC Commissioner John Phillip P. Sevilla said last month that lower oil prices would make their 2014 and 2015 collection targets unattainable.
The effects of slower public spending in 2014 would also spill over until 2016, according to Abad. Lower disbursements meant not as much infrastructure investments and public services were funded in 2014.
Since the double-digit rise in government revenues mainly from the collections of the BOC and the Bureau of Internal Revenue (BIR) outpaced government spending, last year’s budget deficit would have reached only 1 percent of the GDP or smaller than the programmed 2 percent. “There was difficulty in getting key spending agencies to disburse according to program,” Abad said.
The judicial decisions that stopped the flow of more money from the controversial Disbursement Acceleration Program (DAP) and Priority Development Assistance Fund (PDAF) were among the reasons for anemic government spending in 2014, Abad said.
Without the DAP and PDAF, about 1-1.5 percent was trimmed from the economy, the budget chief said. In this regard, the 2014 GDP growth would have “settled realistically” at just 6-7 percent or below the 6.5-7.5 percent goal.
The fourth quarter of last year nonetheless saw “a big improvement” in terms of public spending as bonuses were distributed to government employees last December, Abad said. This would have likely boosted the economy during the October to December period, he said, as compared with the disappointing 5.3-percent GDP growth posted in the third quarter of 2014.
This year, under-spending “will not be tolerated” anymore, Abad said. “Agencies must spend as they should.”
The government plans to disburse up to P2.68 trillion under the 2015 general appropriations and supplemental budget mainly for “Yolanda” rehabilitation efforts approved by President Aquino in December. The projected budget deficit for this year is 2 percent of the GDP.
To foster “relatively faster” spending this year, Abad said the government would put in place mechanisms encouraging disbursements while penalizing the opposite.
The Department of Budget and Management and other key spending agencies would meet with the Office of the President and other members of the Aquino cabinet after the visit of Pope Francis later this month, to discuss measures to fast-track spending, Abad disclosed.
Meanwhile, other government targets were retained by the DBCC, including the 2-4 percent inflation rate forecast for 2015 until 2018, and the foreign exchange rate projection at P42-45 to the dollar for the same four-year period.
The BOC and the BIR’s collection goals were also unchanged as the government would rather adjust the expenditure side of the budget through faster spending rather than slashing the revenue targets, Abad said.
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