Gov't keeping up hopes of 6-7% growth this year

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Metro Manila (CNN Philippines, July 18) — President Rodrigo Duterte's economic managers have kept the government's growth goal between 6-7 percent this year, but approved wider budget deficits until 2022 to cover increased infrastructure spending which will fuel expansion.

The inter-agency Development Budget Coordination Committee (DBCC) kept most of its economic assumptions on Thursday, believing that it can still push growth to beyond 6 percent even after the slump seen during the first quarter.

The Philippine economy expanded by just 5.6 percent from January-March, a four-year low, with authorities pinning the blame on the delayed passage of the 2019 national budget. This left new programs unfunded, as the government had to operate under a reenacted budget until April.

On Thursday, the Asian Development Bank slashed its growth projection for the Philippines to 6.2 percent, down from 6.4 percent previously owing to the budget delay and the trade war between the United States and China, which has weighed down global trade.

"The growth target remains at 6-7 percent. We agree with the ADB with respect to the factors they are mentioning, these are really very huge challenges. But we are optimistic for the remainder of the year that we will hit that growth target," Undersecretary Rosemarie Edillon of the National Economic and Development Authority said during a press briefing.

By 2020, economic growth is seen settling between 6.5-7.5 percent, and 7-8 percent for both 2021 and 2022.

Wider deficit

With brisker economic activity, the DBCC also raised the budget deficit to 3.2 percent of gross domestic product for the next three years, previously from three percent. This means that the government will spend more than what it can raise, with the remainder to be sourced from domestic and foreign borrowings.

National Treasurer Rosalia De Leon said the wider budget gap will allow increased infrastructure spending, as planned by the economic team.

This year, the government plans to raise ₱3.15 trillion against disbursements worth ₱3.77 trillion, leaving a fiscal gap of ₱624.4 billion. By 2020, the state expects to collect ₱3.54 trillion and spend ₱4.21 trillion, leaving a deficit of ₱677.6 billion.

Latest available data showed government spending at ₱1.32 trillion as of end-May, 0.8 percent lower than what was released during the same period last year. The economic team has vowed to catch up with state spending this year, in keeping with their target of boosting infrastructure projects.

De Leon said the government will borrow ₱1.18 trillion this year, which will climb to ₱1.4 trillion by 2020. About 75 percent will be sourced locally, while a fourth will be borrowed from foreign sources.

No more delays?

The Department of Budget and Management (DBM) is set to turn over the proposed ₱4.1-trillion national budget to the House of Representatives soon.

DBM officer-in-charge Undersecretary Janet Abuel said the national expenditure program will be given to lawmakers "not later than the second week of August."

The DBM must turn over the budget proposal to Congress within 30 days after the President's State of the Nation Address, which is scheduled on Monday, July 22.

The government will prioritize public infrastructure and social services, and will pour funding into the creation of the Bangsamoro region, the implementation of the Universal Healthcare Law, and conditional cash transfers to the poorest households, Abuel added.

For this year, the acting Budget chief said the government's catch-up plan for infrastructure is on track, led by the Department of Public Works and Highways. However, she mentioned some delays for projects under the Department of Transportation, as both agencies handle the bulk of the "Build, Build, Build" projects.

Meanwhile, the DBCC said they expect inflation to log between 2.7-3.5 percent this year, and settle within 2-4 percent yearly until 2022. Oil prices are seen at $60-75 per barrel, while the exchange rate is seen at ₱51 to ₱53 against the US dollar this 2019.