BSP chief urges gov’t to spend more

AMANDO TETANGCO JR.: Boost public spending

Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. has urged the government to boost public spending to help the economy recover from the slowdown seen so far this year.

Tetangco said the monetary aspect of the economy already had significant contributions to the economy as indicated by low interest rates that helped boost bank loans.

Year-on-year growth in bank lending has accelerated to nearly 20 percent this year, aided partly by relatively low interest rates that raised demand for loans.

Given this backdrop, Tetangco said that what was needed to accelerate economic growth was a boost from the fiscal side, particularly through higher government spending.

“If the external environment is not that conducive to growth, then growth must be generated internally and one way to do so is through government spending. Government spending must go up,” Tetangco told reporters.

The unfavorable global economic conditions, led by the crisis in the US and eurozone economies, are dragging the income of the Philippine export sector, thus dampening growth of the domestic economy.

Tetangco said that to counter the ill-effects of the anemic performance of the global economy on the Philippines, domestic demand should be boosted. And since private-sector demand was already being fueled by low interest rates, what the country needed was demand coming from the public sector.

The economy, as measured in terms of gross domestic product, grew by only 3.6 percent in the first three quarters from a year ago. This prompted economic officials to admit that the full-year growth target of between 4.5 and 5.5 percent might no longer be attained.

The slower-than-anticipated growth of the economy in the first three quarters was blamed on weak demand for exports as well as the decline in government spending.

Documents from the Department of Finance showed that in the first 10 months of the year, expenditures of the national government amounted to P1.2 trillion, down 5.4 percent from P1.26 trillion in the same period last year.

The latest expenditures figure led to projections that the budget deficit for the entire 2011 would be much lower than the P300-billion ceiling set by fiscal authorities. In the first 10 months, the deficit stood at only P74.25 billion.

Budget officials said the decline in public spending was due to efforts of the Department of Budget and Management to scrutinize spending proposals of line agencies given the Aquino administration’s anti-corruption drive.

Economic officials have claimed that public spending has already picked up at the start of the fourth quarter. They said the public should expect a “dramatic” increase in government spending in the fourth quarter.