Congress urged to pass budget on time to avoid repeat of weak H1 GDP

Finance Secretary Carlos Dominguez III. (File Photo by TOTO LOZANO / Presidential Photographers Division)

MANILA, Philippines — The head of the Duterte administration’s economic team urged Congress on Tuesday to approve the national budget on time to avoid a repeat of last year’s crippling impasse, which has been blamed for the lackluster growth of the gross domestic product in the first half of the year.

“We encourage the legislature to pass the budget on time after due deliberations, as the consequences of operating on a reenacted budget as what happened this year, are extremely detrimental to the nation, especially the disadvantaged,” Finance Secretary Carlos Dominguez III said in a message to the media.

His reaction came after reports came out that members of the House of Representatives were again clashing over proposed changes to the 2020 General Appropriations Bill which threatens to derail its timely approval.

The executive branch wants Congress to approve a P4.1-trillion budget for next year, which would be used primarily to push the economic agenda of President Rodrigo Duterte, especially his administration’s aggressive infrastructure buildup program.

As this developed, the Department of Finance said on Tuesday that the national government’s revenues rose by 9.7% in the first semester of 2019, outstripping nominal GDP growth which registered 7.0% for the period.

In a statement, Finance Undersecretary Gil Beltran said tax revenues grew by 10.1%, also exceeding the 7.0% nominal GDP growth, with BIR collections rising by 10.6% and BOC collections rising by 8.5%.

“This is due to the second phase of TRAIN 1 and continued tax administration reforms,” he said.

Beltran stressed, however, that the delay in the passage by Congress of the 2019 budget weakened expenditures and the domestic economy.

“The national government’s underspending was estimated at around P178 billion,” he said. “This is about 2 percent of first semester nominal GDP.”

The Finance official added that a “catch-up program” has been adopted by the implementing agencies, which is meant to boost growth performance for the second semester.

In the first six months of 2019, non-tax revenues rose by 6.9% due to higher collections of dividend remittances on national government shares of stocks, guarantee fees, and share in the profits of the Philippine Amusement and Gaming Corp.

Expenditures declined by 0.8% in the first semester of 2019, the first drop experienced during the first semester since 2011. This is a significant reversal from the 20.5% rise in the same semester of 2018 — due to the four-and-a-half-month delay in the approval of the General Appropriations Act by Congress.

Revenue effort rose by 0.44 percentage point to 17.52% in the first semester of 2019 compared to 17.08% in the same semester of last year. The tax effort — the ratio of total tax collections versus the total value of the country’s economic output — also rose by 0.43 percentage point, from 15.20% to 15.63%.

Expenditure effort declined to 18%, lower than the 19.42% recorded in the first semester of 2018 due to the reenacted budget. The moderated growth in expenditures led to a lower national government deficit, which settled at 0.48% GDP.

/atm