DOF forecasts economic slowdown under reenacted budget

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Metro Manila (CNN Philippines, February 1) — The Department of Finance warns against the government continuing to run under last year's reenacted budget.

In an interview with CNN Philippines Business Roundup, Finance Assistant Secretary Tony Lambino said that the economy currently risks a 1.1 to 2.3 percentage point slowdown in its gross domestic product (GDP) for the first quarter of 2019 if the government continues to operate on the reenacted budget.

"That's a big hit," Lambino warned. "We're really hoping that this will only be a first quarter implementation of a reenacted budget." 

Quoting Finance Secretary Carlos Dominguez, he said the delay in the approval of the proposed 2019 budget has prevented the government from spending P46 billion in health care, education and infrastructure projects.

Unionbank of the Philippines Chief Economist Carlo Asuncion added that a reenacted budget sends a bad message to investors.

"Investors are looking inside and are thinking, can they really get their act together? Can they really deliver on what they said they would deliver, which is increasing spending what is already programmed for infrastructure," Asuncion told CNN Philippines Business Roundup.

He noted that government spending was a key driver of economic growth last year, and this would be stymied by a reenacted budget.

"If you look at last year's GDP, one of the biggest drivers was the spending on infrastructure. And if the budget is reenacted with goverment using the old 2018 budget, applying it supposedly to new projects, there is going to be a problem there," Asuncion stressed.

He placed GDP growth for 2019 at 6.8 percent because of lower inflation and interest rates.

This is lower than the government target of target of 7 to 8 percent. GDP growth in 2018 was the slowest in three years at 6.2 percent.