Aquino admin backs Duterte's high spending, deficit thrust

MANILA, Philippines — The Duterte administration's plans to increase spending and widen the budget deficit got the backing of the outgoing Aquino government, which was criticized for five years of below-target disbursements.

"With the news of the next administration intending to double down on spending, raise the deficit ceiling and borrow more, (Finance Secretary Cesar) Purisima extended his support," the Department of Finance (DOF) said in a statement on Friday.

For his part, Budget Secretary Florencio Abad said he "would not mind lifting the spending caps" on agencies which can fast track spending.

His successor, Benjamin Diokno, said last Wednesday the next government is looking at a higher deficit equivalent to three percent of gross domestic product (GDP) deemed "manageable."

If achieved, the figure will be the widest budget gap since 2010 when President Aquino took over and ended the year with a deficit of 3.5 percent of GDP.

Since then, data showed deficit had consistently gone down to two percent in 2011, 2.3 percent in 2012, 1.4 percent in 2013, 0.6 percent in 2014 and 0.9 percent last year.

'Real challenge'

In an e-mail, incoming Finance Secretary Carlos Dominguez said he, Diokno and new Socio-economic Planning Secretary Ernesto Pernia will soon discuss the specifics of their government's macroeconomic policies.

In his eight-point economic agenda, Duterte earlier vowed to "continue and maintain" Aquino's policies, but added he would increase infrastructure spending to five percent of GDP from last year's 3.3 percent.

Quoted in the statement, Purisima said he is convinced the fiscal space generated under Aquino will allow Duterte to maneuver to pump prime the local economy.

"The past six years has built the right foundations, setting the stage for wider policy options to sustain growth," the finance chief said.

"Enough confidence and fiscal space has been amassed for the government to support a more expansionary fiscal policy stance," he added.

On the revenue side, DOF said it increased tax revenues by "at least" two-thirds from their pre-2010 levels. Taxes collected as a percentage of GDP rose from 12.2 percent in 2009 to 13 percent in the first three months.

Borrowing funds may also be charged with "reasonable" rates, Purisima said, citing the country's investment grade rating.

Abad, meanwhile, said there was no lost opportunity for Aquino to speed up spending and boost economic expansion more than the 6.9 percent recorded in the first quarter.

"It was more of a consequence of some agencies unable to keep pace with growth. For so many years, these agencies had been used to having limited budgets," he said in a text message.

"When suddenly they had funds to spend, their planning, procurement and execution capacities could not absorb the additional funds," he added.

According to DOF data, budgets in education, health and infrastructure rose by 125 percent, 336 percent and 360 percent, respectively since 2010. These, however, were not all spent.

For instance, last year's capital outlays, which include infrastructure, only amounted to P436 billion, more than a fifth below the P546.7-billion program.

"The real challenge is improving the absorptive capacity of certain agencies," Abad said.