NEDA to propose new multibillion-peso stimulus plan

The National Economic and Development Authority (NEDA) has forecast a “bigger” funding gap next year as it is set to propose a fresh P200-billion stimulus package to accelerate economic growth.

Socioeconomic Planning Secretary Ralph Recto said he would recommend to the Cabinet members today an Economic Resiliency Plan (ERP) 2 next year to support the country’s economic growth.

“More or less, we’re looking at P200 billion [about $4 billion] for ERP 2. It would be for infrastructure and social protections,” Recto told reporters, adding that details will be discussed in today’s meeting of the country’s senior economic managers.

Recto said the economy would have a recovery next year, but it would really “very modest.”

“So, the idea is to prepare for that global economic rebound,” he added.

For next year, Development and Budget Coordinating Committee (DBCC) predicted that gross domestic product (GDP) to expand between 2.6 percent and 3.6 percent, lower than its previous projection of 4.3 percent to 5.3 percent.

A key economic indicator, GDP refers to the total value of goods and services produced in a country.

For this year, the committee trimmed the country’s GDP growth goal to between 0.8 percent and 1.8 percent this year from the previous program of 3.1 percent to 4.1 percent.

The cut came after the disappointing 0.4-percent GDP growth in the first quarter.

In the second quarter, Recto said GDP “would be better than the first. That’s our initial forecasts that we are looking at.”

The government has offered P330 billion (about $7 billion) to stimulate domestic spending in 2009. But it came at a huge cost as the fiscal deficit hit P153.4 billion (about $3.2 billion) in the first six months, up 752.2 percent from last year’s as weak revenues can’t fill rising expenditures.

Deficit forecast

In terms of budget gap, Recto said, “Clearly, we would still have a bigger deficit than this year.”

For 2009, the government increased the budget deficit ceiling to P250 billion, or about 3.2 percent of GDP, from the previous program of P199.2 billion, or about 2.5 percent of GDP.

The deficit-to-GDP ratio is a closely watched indicator, which shows how long a government can incur revenue collection shortfalls.

The Development and Budget Coordinating Committee projected a budget deficit of P208.4 billion, or 2.5 percent of GDP.

The government will borrow P640.279 billion next year, or P12.7 billion less than this year’s plan to raise P652.981 billion from new debt.

Of the total borrowings, P163.088 will be sourced from offshore banks, while the remaining P477.191 billion will come from domestic sources.

While, revenue collections are expected to reach P1.32 trillion next year, or 15.9 percent of GDP.

Government expenditures, on the other hand, are estimated to P1.53 trillion, or 18.4 percent of GDP.–Darwin G. Amojelar, Senior Reporter, Manila Times and Xinhua