MANILA – The Philippines is capable of hitting the high end of its economic growth projection for this year of 5 percent to 6 percent, but this growth assumption should have been accompanied by higher revenues that could have bolstered spending for this year, the Congressional Policy and Budget Research Department said.
In its latest research note, the CPBRD said the Philippines may grow by 5.8 percent this year after expanding by 6.1 percent in the first six months.
The low end of the projection was used in determining the budget ceiling, the target revenue effort of 14.5 percent, and the expenditure program of P1.839 trillion or 17.1 percent of gross domestic product.
Had the Aquino administration used the 6 percent GDP growth assumption, it could have jacked up the projected revenue and corresponding budget ceiling while keeping the current deficit target at 2.6 percent of GDP.
“In which case, the government could have increased its expenditure by P16.4 billion. This amount, while modest, could go a long way in addressing unmet demand for needed economic and social services,” CPBRD said.
This would translate to 43,700 classrooms or accommodate 11.7 million more families under the Pantawid Pamilyang Pilipino Program.
In effect, this additional spending could boost GDP growth.
“It should be noted, however, that the effectiveness and efficiency of the budget is subject to the absorptive capacity of implementing agencies concerned,” the House unit said.
For next year, the CPBRD sees the economy growing by 5.3 percent, more optimistic than the 5-percent projection of the Asian Development Bank, the International Monetary Fund and the World Bank. This, however, is way below the government assumption of between 6-7 percent.
Using this growth projection, the Aquino administration was able to set the financing from tax revenues, which is then affected by the GDP growth rate. To bridge the shortfall in revenue collections, the government could hike its borrowing plan, which then could push up interest rates or foreign borrowing that could expose the country to foreign exchange volatilities.
“[The] optimistic assumptions could compromise the achievement of revenue targets and the corollary deficit program,” CPBRD said, adding that it is, therefore, important to have a set of realistic macroeconomic assumptions.
“Thus it is critical for the government to seek a balance in the need for manageable and sustainable deficit with attaining a higher level of inclusive growth,” CPBRD said.
Aside from this, the CPBRD suggested an accountability mechanism so that the government can explain why targets were not achieved. Harmonizing numbers for assumption and targets and having a point forecast, especially for macroeconomic assumptions as basis for realistic budgeting, could improve accountability.
“When accountability is not enforced in the achievement of the macroeconomic assumptions underpinning the budget, economic growth could be compromised,” CPBRD said.
More than achieving growth targets, the government must make sure that meeting targets would translate to productive employment. –Likha Cuevas-Miel, InterAksyon.com
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