The four-month budget deadlock in the Congress severely held back government efforts to boost spending on infrastructure and social services at the onset of 2019, handicapping growth from soaring to possibly as high as 6.6 to 7.2 percent instead of the lower-than-expected 5.6 percent in the year’s first quarter, Finance Secretary Carlos Dominguez III has told senators.
To substantially make up for underspending in the first quarter, which is estimated at about P1 billion a day, Dominguez said during Monday’s briefing for the Senate finance committee that the Cabinet’s Economic Development Cluster (EDC) came up with a “carefully crafted and bold expenditure catch-up plan” to enable the economy to expand above 6 percent for the whole of 2019.
Dominguez said the EDC, which he heads, received commitments from key infrastructure agencies during its May 24 meeting to vigorously implement their updated spending programs “to substantially offset the lower spending in the first quarter resulting from both the budget delay and the election ban on public works.”
“By our estimates, the Philippine economy should have grown by at least one percentage point higher, at 6.6 and possibly 7.2 percent in the first quarter, if the 2019 fiscal program had been approved on time,” said Dominguez as he briefed Senate finance committee members on the economic impact of the reenacted 2018 budget, which had forced the government to hold back on implementing new programs and projects in the year’s first quarter.
Dominguez delivered the statement on behalf of the Department of Finance (DOF), Department of Budget and Management (DBM) and the National Economic and Development Authority (NEDA).
“This should have been well within our GDP (gross domestic product) growth target of 6 to 7 percent this year. This is no surprise as national government spending accounts for around 20 percent of the entire economy. If the government does not perform well, all our gains will be eroded,” Dominguez told the committee chaired by outgoing Sen. Loren Legarda.
Dominguez said that with the government forced to work on a reenacted budget for four months, projects such as the Department of Education (DepEd)’s repair of 18,575 classrooms and construction of 4,110 new ones were not done in the first quarter, while payment for 328,889 grantees of the Senior High School Program in the amount of P7.4 billion and the implementation of the new school dental health care program were similarly delayed.
He said the reenacted budget also led the government to miss the opportunity to create as much as 260,000 to 320,000 more jobs, affecting the construction, public administration and defense, wholesale and retail trade, land transport, and education sectors.
“The budget reenactment also derailed poverty reduction efforts, where as many as 420,000 more Filipinos could have been taken out of poverty.” Dominguez said. “This is a clear example of how politicking could harm our people.”
Dominguez said the government is now doing its best to hurry up the execution of delayed projects, with two of its key infrastructure agencies–the Department of Public Works and Highways (DPWH) and the Department of Transportation (DOTr)–committing to speed up the implementation of projects worth a combined P803.1 billion from the second to fourth quarters.
Infrastructure disbursements from other agencies such as the Department of National Defense (DND), DepEd, and the Department of Health (DOH) can further drive spending growth if these agencies are able to accelerate from hereon the implementation of their respective capital outlay programs and projects.
“The Economic Team will do its best to restore last year’s upward momentum in our growth rate. But we cannot do this alone. This is a shared responsibility. I hope that everyone will do their part as well,” Dominguez said at the briefing.
The Finance chief said that for the entire 2019, national government spending is targeted to reach P3.774 trillion, equivalent to 19.6 percent of GDP and higher by 10.7 percent than the actual disbursement in 2018.
For the entire year, infrastructure disbursements would have to reach P1 trillion, equivalent to 5.2 percent of GDP, with the national government accounting for P808.7 billion, he said.
However, in the first quarter, actual government disbursements amounted to only P778 billion, barely improving from the P772 billion in 2018.
Thus, to achieve this year’s disbursement target, the government must spend a total of P2.996 trillion from the second to fourth quarters.
Infrastructure disbursements, meanwhile, reached only P207.2 billion in the first quarter. This means the government has to disburse around P792.97 billion from the second to fourth quarters of 2019 for infrastructure projects in order to catch up, Dominguez said.
“The DPWH and DOTr remain optimistic that they can deliver on their respective commitments by accelerating infrastructure disbursements and implementation of projects. To enable them to attain their targets, it would require close cooperation and support of other government agencies by expediting the approval of permits and other requirements,” Dominguez said. “Hopefully, no major weather disturbances will disrupt the implementation of these projects.”
Agriculture, Dominguez, said will also have to reverse its dismal performance by growing at least 2 percent per year.
As the private sector is also a key driver of growth, Dominguez said the Ease of Doing Business (EODB) Law, which was enacted into law in May year, needs to be implemented as soon as possible to encourage investments.
The Executive and the Legislative branches of government also need to work together in passing legislation that allows for a business-friendly environment, including the Public Service Act, Foreign Investments Act, and the Retail Trade Act, Dominguez said.
Dominguez said the government will also fast-track the implementation of its priority socioeconomic programs, such as the National ID System, Pantawid Pamilyang Pilipino Program (4Ps), social pensions, unconditional cash transfers (UCTs), Pantawid Pasada and the fuel marking program.
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