Q1 GDP would’ve hit 7.2% if only 2019 nat’l budget was OKd on time
MANILA, Philippines — If only legislators did not scramble over “pork” and passed the 2019 national budget on time, the Philippine economy would have grown by an almost six-year high of 7.2 percent, the Department of Finance (DOF) said Monday.
“Underspending of P69.5 billion in the first quarter of the year reduced GDP [gross domestic product] growth by 1.6 percentage points. This was offset by election spending of candidates and lower consumer inflation by the combined impact of about 0.7 percentage point of GDP, boosting household consumption by 6.3 percent in real terms,” DOF Undersecretary and chief economist Gil S. Beltran said in an economic bulletin.
GDP growth fell to a four-year low of 5.6 percent during the first quarter mostly due to the delayed implementation of the 2019 appropriations that slowed government spending alongside weak growth in the agriculture and exports sectors.
Based on Beltran’s estimates, “if the budget (was) approved as scheduled and disbursements were made promptly, GDP growth in the first quarter would have risen to 7.2 percent,” he said.
First-quarter GDP growth at 7.2 percent would have had been the fastest since the 7.5 percent posted in the second quarter of 2013, and the first time to return to the 7-percent level since the 7-percent expansion recorded during the third quarter of 2013, Philippine Statistics Authority (PSA) data showed.
The state planning agency National Economic and Development Authority (Neda) had computed GDP growth of 6.6 percent had the 2019 budget been implemented since the start of the year.
DOF Secretary Carlos Dominguez III, who heads the Duterte administration’s economic team, earlier said the government underspent over P1 billion on public goods and services daily when it operated under a reenacted 2018 budget.
It was only on April 15 that President Rodrigo Duterte finally signed the 2019 appropriations measure, after he vetoed P95.3 billion in projects that were not included in his administration’s priorities.
“The budget impasse in the Congress during the year’s first three months had set off a spending cutback, which, in turn, stifled economic activity. Were it not for the Senate-House deadlock over the 2019 general appropriations bill, which forced the government to operate on a reenacted 2018 budget for the entire first quarter, the economy could have received a tremendous boost from what should have been much higher state spending on infrastructure modernization and human capital formation at the onset of 2019,” Dominguez said in a statement last week.
Beltran noted that government expenditure growth from January to March dropped to 0.08 percent in nominal terms from 25.4 percent a year ago.
“From the expenditure side, the lower growth can be traced to a moderated growth in both government consumption and capital formation/investment, which grew by 7.4 percent and 6.8 percent, respectively, compared to 13.6 percent and 10.3 percent in the same quarter of last year,” Beltran said.
“The slowdown in capital formation is explained by the significant contraction in public construction by 8.6 percent compared to 22.6-percent growth in the same quarter of 2018. This is slightly tempered by 8.6-percent growth in private construction compared to 8.1 percent in the same quarter of 2018,” he added.
“From the supply side, agriculture has decelerated to 0.8 percent in the first quarter. This confirms that El Niño has affected the sector. Industry also slowed, weighed down by mining and quarrying, slowdown in manufacturing activities, and construction. Note that growth in manufacturing and construction are much lower than GDP’s,” according to Beltran.
To make up for underspending at the start of the year, the economic team already committed to “quickly implement and disburse the fiscal program as indicated in the 2019 General Appropriations Act (GAA) to make up for lost time.”
“Economic growth is expected to finish stronger for the rest of 2019 as the government puts ‘Build, Build, Build’ on the fast lane, taking into account possible adverse weather conditions, and as domestic consumption picks up amid cooling inflation,” Dominguez, Socioeconomic Planning Secretary and Neda chief Ernesto M. Pernia, and Acting Department of Budget and Management (DBM) Secretary Janet B. Abuel said in a joint statement last week.
“As the executive branch exhibits its commitment to executing projects under the 2019 budget, so too do we call on Congress to remain responsive to the needs of Filipinos and conscientious in the timely passage of future budgets,” they said.
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