Dark skies in the horizon: Growth seen falling below 6%

The need to narrow the budget deficit prompted a slowdown in government spending in the first six months of 2019, risking slower economic growth, estimated to fall below 6 percent, in the second quarter of the year.

The fiscal deficit as of end June 2019 was nearly 80 percent lower than the P193 billion posted during the first six months of 2018, according to Bureau of Treasury data released on Monday (July 22).

From January to June, the government spent a total of P1.59 trillion, down by a fraction of one percent from P1.604 trillion in 2018 “mainly because the government operated under a reenacted budget during the first four months of 2019,” the Treasury said in a statement.

President Duterte signed the P3.7-trillion 2019 national budget just last April 15 as the two chambers of Congress squabbled over corruption-laden “pork” funds.

The government underspent by at least P1 billion a day between January and April.

Revenue, tax and non-tax, rose by nearly 10 percent to P1.5 trillion from P1.4 trillion in 2018 as the government’s two largest collection agencies—Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC)—shored up collection efforts.

The BIR’s end-June collection jumped nearly 11 percent year-on-year to P1.066 trillion.

The BOC collection of duties and other taxes climbed more than 8 percent year-on-year to P303 billion also in the first six months of 2019.

ING Bank Manila senior economist, Nicholas Antonio T. Mapa, said in a note to clients that even after spending resumed following the national budget’s approval and the lifting of a ban on projects in June, “spending in the second quarter slipped by roughly 2.3 percent from the second quarter 2018 levels.”

“Despite the government’s best efforts to implement ‘catch-up’ spending, the projected misstep coming from the government spending side coupled by possible handicapped capital formation” could make it difficult for the Philippine economy “to get past 6 percent again,” Mapa said.

The catch-up spending plan Mapa referred to involved a spike in infrastructure spending by the Departments of Transportation and Public Works and Highways on projects worth at least P803 billion.

The catch-up program was expected to reverse underspending at the start of 2019 in a bid to jack up economic growth to over 6 percent for the entire 2019.

First-quarter GDP growth fell to a four-year low of 5.6 percent mainly due to public underspending.

In the month of June alone, the government recorded a budget deficit of P41.8 billion, nearly 23 percent smaller than P54.3 billion a year ago.

Disbursements in June declined to a fraction of one percent year-on-year to P275.7 billion, while revenues increased 4.32 percent to P233.9 billion.

For 2019, the Cabinet-level, interagency Development Budget Coordination Committee (DBCC) last week programmed a full-year budget deficit of P624.4 billion, as the expenditures target of P3.77-trillion should outpace the P3.15-trillion revenue goal./TSB