By Cai Ordinario, March 11 2019; Business Mirror
https://businessmirror.com.ph/2019/03/11/neda-economists-cite-implications-of-budget-delay/
Image Credit to Philippine Star
THE National Economic and Development Authority (Neda) and local economists expressed concern that further delay in the passage of the 2019 budget could dampen the country’s growth prospects this year.
Socioeconomic Planning Secretary Ernesto M. Pernia told the BusinessMirror that the longer the economy waits for the passage of the budget, the more adverse the impact it will have on the country’s growth this year.
The Development Budget Coordination Committee (DBCC) target GDP growth is 7 to 8 percent in 2019 until 2022 annually.
“The longer the delay, the more the adverse effect on growth,” Pernia said. “Of course, it is [a concern] and should be dismaying to all citizenry, including business and investors, who are invariably affected!”
Local economists also shared their insights after Sen. Panfilo Lacson said on Sunday that “from all indications,” the country will live under a reenacted budget until August, as the terms the incumbent Speaker and House appropriations panel chairman end in late July.
Lacson said this because Speaker Gloria Macapagal-Arroyo and Appropriations panel chief Rolando G. Andaya Jr. are insisting on keeping the changes they made in the bicameral conference committee-approved budget version that was ratified by both chambers. Senate President Vicente C. Sotto III will not sign the enrolled bill because of this, stalling the endorsement of the budget to President Duterte for signing into law.
Economists Calixto V. Chikiamco and Action for Economic Reforms Coordinator Filomeno S. Sta. Ana III told the BusinessMirror that the delay in the budget will be bad for government spending, particularly for the “Build, Build, Build” (BBB).
Chikiamco said one immediate impact on government spending is the slower implementation of BBB projects. It is a problem since the current administration opted to finance infrastructure projects through Official Development Assistance (ODA) and the national budget.
He said if the current administration only considered undertaking more public- private partnerships (PPPs) to finance its infrastructure projects, this problem could have been avoided. Sta. Ana also said the standoff between the Senate and the House of Representatives on the 2019 budget will cause investors to punish the country, further undermining GDP growth this year.
“That’s really bad. Investors will punish us. That means lower growth as our growth is still driven by government spending. Worse, it shows that the Executive is weak, and that can have repercussions on other reforms as well that require legislation. It can also be interpreted as a conspiracy to use the budget for partisan purposes in this election period. Really bad,” Sta. Ana said.
The economists also do not see any way around the situation. Even a supplemental budget, they said, would have little effect on speeding up government spending for infrastructure projects.
Sta. Ana said even if a supplemental budget is approved, there has already been a delay. He said the decision to delay the passage of the national budget was a wrong one.
“Besides, I don’t think a supplemental budget is feasible with the current standoff,” Chikiamco added.
In the view of Cid Terosa, dean of the University of Asia and the Pacific School of Economics, “There will be some delay in disbursing funds for programs and projects. In this sense, part of the beneficial effects of government spending can be compromised. I believe, however, that election and consumer spending can offset potential adverse effects of delays in government spending.”
In January, the President’s economic team already identified the reenacted budget as a major factor that will significantly affect the implementation of the BBB and, consequently, the country’s GDP growth this year.
In a joint statement, the Neda, Department of Finance (DOF) and the Department of Budget Management (DBM) said the slower-than-expected economic growth in 2018 and the delay in the BBB highlight the government’s priorities in addressing uncertainties.
The Philippine Statistics Authority (PSA) said GDP in the fourth quarter of 2018 slowed to 6.1 percent in 2018, from 6.5 percent in 2017. For the full-year 2018, GDP growth also decelerated to 6.2 percent in 2018, from 6.7 percent in 2017.
In order to address these concerns, the President’s economic team said it aims to address competitiveness issues, such as improving transport, communications and logistics. The government, they said, will also be working toward the integration of small and medium enterprises and large establishments.
Neda, DOF and DBM will also be on the lookout for downside risks such as those coming from the US-China trade tensions, slowing global demand, higher tariffs, and protectionist policies that stifle investments and disrupts global value chains.
The economic team also said other risks include tighter financing conditions in emerging markets due to the strengthening of the US dollar and rising risk premiums, as well as heightened geopolitical tensions.
The President’s economic team also does not discount inflation in 2019. They said this is the reason the government continues to hang its hopes on the passage and implementation of the rice tariffication law.
