Economic managers reduce growth target

IT’S official. The Aquino administration has settled for lower growth targets for this year and 2012, notwithstanding a new fiscal stimulus package for the remainder of 2011.

In a presentation before the Senate on Wednesday, Philippine economic managers announced that the country’s gross domestic product would grow by 4.5 percent to 5.5 percent this year, lower than an earlier range of 5 percent to 6 percent. For next year, growth was cut to a range of 5 percent to 6 percent from the previous 5.5 to 6.5 percent.

The lower growth target was despite a P72.11-billion stimulus package that President Benigno Aquino 3rd unveiled to fast-track disbursements and push economic growth in light of the global slowdown and the onslaught of recent calamities.

The stimulus entails no new money, as funds were plucked from unreleased appropriations since last year using the zero-based budgeting approach.

Without the stimulus package, the government expects GDP growth of 4.2- to 5.2-percent for the year. An indicator of economic performance, GDP is the amount of final goods and services produced in the country.

“The country was affected by external shocks such as the Japan tsunami, oil price hikes, US and eurozone debt crises and the geopolitical tension in the Middle East and North Africa. On the domestic side, under spending dragged growth in the first half,” Socioeconomic Planning Secretary Cayetano Paderanga Jr. told the senators. Philippine GDP grew by only 4 percent in the first half of the year, after the second quarter growth slowed to 3.4 percent.

Economic managers also cut their 2011 growth outlook for both exports and imports to 5 percent and 13 percent, respectively, from the earlier forecast of 9 percent to 10 percent, and 17 percent to 18 percent.

For next year, exports and imports growth estimates were slashed to 10 percent and 15 percent, from the earlier forecast of 12 percent and 18 percent.

1-year T-bill rate lower

Forecasts for inflation, the US dollar-peso exchange rate and the price of Dubai crude were kept.

The one-year Treasury bill rate, however, was reduced to a range of 2 percent to 3 percent from the earlier 5 percent to 6 percent for 2011, and to a range of 2.5 percent to 4.5 percent from three to five percent for 2012.

Department of Budget and Management Secretary Florencio Abad said the outlook for disbursement this year was also reduced to P1.62 trillion from P1.71 trillion as catch-up spending plans were not enough to meet the original spending requirement.

For next year, disbursement expectations were slightly lowered to P1.83 trillion from P1.85 trillion.

The inter-agency Development and Budget Coordination Committee (DBCC) also eased revenue targets from P1.41 trillion to P1.36 trillion for this year, and from P1.57 trillion to P1.54 trillion for 2012.

“The outlook is there just to be realistic about the whole thing, so that we can balance the revenues and expenses better. But the point is, we’re pushing them every day to meet their [original] targets,” Finance Secretary Cesar Purisima said, referring to the Bureaus of Internal Revenue and of Customs.

PCCI prods pump priming

During the opening day of the 37th Philippine Business Conference, the Philippine Chamber of Commerce and Industry said the government should spend more to pump prime the economy and create more jobs.

“We are really happy if we could grow about 3.5 percent this year because the global economy is really bad, even our exports sector. We hope the government like the private sector to help in spending more,” Francis Chua, PCCI president, said.

Benjamin Diokno, economics professor at the University of the Philippines, said the announced fiscal stimulus program of the government is a “misnomer.”

“Since no new funds are being authorized or programmed, I don’t see how it can stimulate the economy between now and the end of the year. The 2011 budget [net of debt service] is smaller than the 2010 budget adjusted for inflation. So under the best possible scenario, the contribution of public spending to economic growth would still be negative, with or without the so-called fiscal stimulus,” Diokno said.

Since no new additional appropriation is involved, Diokno called the fiscal stimulus a “catch-up plan with a twist.”

“The twist being the replacement of slow large-scale projects with quick-disbursing, small-scale, rural-based projects. My best guess is that this late attempt to perk up a slowing economy will have very little impact this year,” he added.

The UP professor also said that investors have more important things to worry about than the Philippines’ growth rates.

“Investors worry about the policy direction of the Aquino administration. Its PPP initiative has stalled. Its rules are under review. After fixing a few serious kinks, the PPP program has to be re-launched,” Diokno said, referring to the public-private partnership scheme. –Katrina Mennen A. Valdez Reporter  with report from Darwin G. Amojelar, Manila Times