Category : Press Release
Date : May 27, 2019
Agency : National Economic and Development Authority
Title : JOINT STATEMENT: Senate Committee Briefing on the 1st Quarter 2019 Reenacted Budget

delivered by Carlos G. Dominguez

Secretary of Finance

Senate Committee Briefing on the 1st Quarter 2019 Reenacted Budget

May 27, 2019

Senator Loren Legarda, fellow workers in government, friends in the media, good morning.

The delay in passing the 2019 budget during the first three months of this year hit our economy very hard. Public spending plays a crucial role in supporting the rapid expansion of domestic economic activity. The delay led to our GDP growth rate for the first quarter to fall below expectations, a four-year low of 5.6 percent.

Because of the budget delay, government was forced to work with last year’s budget. This resulted in underspending of around 1 billion pesos a day in opportunities lost, which could have been spent for social services and infrastructure projects during the first quarter.

For instance, the Department of Education’s repair and rehabilitation of school buildings were severely hampered. A total of 18,575 classrooms were supposed to be repaired and 4,110 new classrooms constructed in the first quarter of 2019 and none of these were done. The payment for 328,889 grantees of the Senior High School Program in the amount of 7.4 billion pesos and the implementation of the new school dental health care program also had to be delayed.

Were it not for these, the economy could have received a tremendous boost from much higher state spending on infrastructure modernization and human capital development projects at the onset of 2019.

Besides the delay in new and ongoing infrastructure projects as well as the implementation of social services, the reenacted budget during the first quarter led the government to miss the opportunity to create as many 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. This is a clear example of how politicking could harm our people.

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. This should have been well within our GDP 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.

Despite the delay of one full quarter in the execution of our 2019 fiscal program, we are doing our best to hurry up the execution of delayed projects. The members of the Economic Development Cluster held two meetings--the last one last Friday--to formulate a carefully crafted and bold expenditure catch-up plan to enable us to hit a GDP growth rate of above 6 percent this year. Key infrastructure agencies presented their updated spending plans for this year. This is to substantially offset the lower spending in the first quarter resulting from both the budget delay and the election ban on public works.

To enable us to hit a GDP growth rate above 6 percent this year, national government needs to ramp up its spending. In 2019, national government disbursements are targeted to reach 3.774 trillion pesos, equivalent to 19.6 percent of GDP. This is 10.7 percent higher than the actual disbursement in 2018. Meanwhile, total infrastructure disbursements would have to reach 1 trillion pesos, equivalent to 5.2 percent of GDP, with the national government accounting for 808.7 billion pesos of targeted infrastructure spending.

In the first quarter of 2019, actual government disbursements amounted to 778 billion pesos, barely rising from the 772 billion pesos in 2018. For us to achieve this year’s disbursement target, the government must spend a total of around 2.996 trillion pesos from the second to fourth quarters of the year.

Infrastructure spending accounts for almost one-third of the amount of disbursements programmed for the said quarters. Actual infrastructure disbursements in the first quarter of this year amounted to 207.2 billion pesos. To reach our total infrastructure disbursement target of 1 trillion pesos for the entire year, the government must disburse around 792.97 billion pesos from the second to fourth quarters of the year.

The spending commitment of our two main infrastructure agencies--the Department of Public Works and Highways and the Department of Transportation-- with an estimated combined amount of 803.1 billion pesos, is sufficient to cover the national government’s infrastructure target. Infrastructure disbursements from other agencies such as the Department of National Defense (DND), Department of Education (DepEd), and the Department of Health (DOH) can further drive spending growth if they are able to accelerate implementation of their capital outlay programs and projects. Said programs include the Armed Forces of the Philippines (AFP) Modernization Program of the DND, the school-building program of the DepEd, and the Health Facilities Enhancement Program of the DOH.

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. Hopefully, no major weather disturbances will disrupt the implementation of these projects.

It was also agreed that the government will fast track the implementation of its priority socioeconomic programs, such as the National ID System, 4Ps, social pension, unconditional cash transfers, Pantawid Pasada, and fuel marking program.

But aside from the infrastructure and social protection programs, the government also has to double its efforts in the agriculture sector, which should expand by at least 2 percent per annum.

Economic growth can also be strenuously driven by the private sector. To this end, the Ease of Doing Business Law - which was enacted into law last May 28, 2018 - needs to be implemented with haste to encourage investment and drive growth. The Executive and the Legislative branches of government also need to work together in passing legislation that allows for a business-friendly environment, such as the Public Service Act, Foreign Investments Act, and the Retail Trade Act.

Henceforth, the economy is expected to expand at a higher clip for the rest of 2019 as inflation continues trending towards the official target range of 2 to 4 percent and the government accelerates the implementation of its Build, Build, Build and human capital development projects to make up for state underspending.

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.


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National Economic and Development Authority

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