Dominguez: 2020 growth to rebound with record-high budget in place

MANILA, Philippines — The Duterte administration’s chief economic manager is optimistic that growth will bounce back this year with the record-high P4.1-trillion 2020 national budget already in place and poised to be spent on time.

Finance Secretary Carlos G. Dominguez III said late Thursday that had last year’s P3.7-trillion budget been passed on time “and the national government was able to replicate the 2018 growth in government consumption and government construction in 2019,” the gross domestic product (GDP) should have grown by 6.8 percent last year, citing Department of Finance (DOF) estimates.

However, the government reported last Thursday that GDP growth instead fell to an eight-year low of 5.9 percent partly due to public underspending at the start of the year largely blamed on late budget implementation.

“A major speed bump last year was the four-months-and-a-half delay in the congressional approval of the 2019 GAA [general appropriations act], which had forced the Duterte administration to run the government on a reenacted 2018 budget and hold off the implementation of new and ongoing programs and projects that would have accelerated the growth momentum in last year’s first semester,” Dominguez said in a separate statement.

“Although it did not grow as fast as we had wanted it to in 2019, the domestic economy grew faster than most other economies in the East Asia and Pacific region last year, and it will remain among the world’s fastest-growing economies this year on the back of the Philippines’ strong macroeconomic fundamentals and the game-changing reforms implemented by President Duterte to sustain high—and inclusive—growth,” the Finance chief said.

Moving forward, Dominguez said that “this year’s fiscal expansion for greater economic activity will get its multiple boosts from the swift congressional approval of the 2020 GAA, extended validity of the 2019 national budget, and higher revenue take from the implementation of the comprehensive tax reform program plus tax administration reforms by the top two revenue collectors—the Bureaus of Internal Revenue (BIR) and of Customs (BOC).”

This year’s bigger budget was aimed at jacking up economic growth to 6.5-7.5 percent.

While the actual full-year 2019 growth rate fell below the government’s downscaled 6-6.5 target range, Dominguez noted that fourth-quarter expansion surged to 6.4 percent—the highest quarterly growth in six quarters—as the government fast-tracked expenditures on big-ticket infrastructure projects.

“The pickup in growth in the fourth quarter of 2019 resulting in part from the government’s catch-up spending following anemic expansion in the year’s first semester will gain speed in 2020, with the domestic economy firing on all cylinders as a result of even more vigorous investments in infrastructure and human capital development for the entire year ahead,” the DOF chief said.

“The timely approval of this year’s budget plan and the extended validity of certain portions of the 2019 GAA till the yearend will provide the economy with a double-barrelled boost enough to sustain—and even crank up—the level of catch-up spending that the economic team, upon President Duterte’s directive, carried out in the remaining half of last year to reverse anemic growth in the first two quarters brought about by the delay in the congressional approval of the national budget,” he added.

With a larger national budget, Dominguez wanted agencies “to do a better job of implementing more priority programs and projects—and efficiently disbursing their bigger outlays—this 2020,” citing that the latest Bureau of the Treasury (BTr) data nonetheless had indicated “better absorptive capacity of national government offices in the past year.”

The Department of Budget and Management (DBM) already ordered government agencies to spend all of their respective 2020 budgets within the year, or else lose them, under the cash budgeting system.

As far as the agriculture sector was concerned, Dominguez was also bullish about its sustained recovery.

“The improved performance of the agriculture sector in the latter half of last year is likely to continue, too, in 2020, as the government implements more intervention measures to boost palay productivity, with funding support from the annual P10-billion Rice Competitiveness Enhancement Fund (RCEF), “ according to Dominguez, who served as agriculture secretary under former president Corazon Aquino.

However, Dominguez said the government remained on the lookout for these possible downside risks to the Philippines’ growth in the near term: “possible lingering impact of last year’s trade spat between the United States and China; any possible re-escalation of the US-Iran conflict that could induce global oil price volatility; and, depending on its intensity, an explosive eruption of Taal Volcano that could impact Metro Manila and neighboring regions.”