Q1 GDP growth to suffer from budget delay — Dominguez

MANILA, Philippines — The first quarter gross domestic product (GDP) growth may suffer due to the delay in the passage of the 2019 General Appropriations Act (GAA), the Department of Finance (DOF) said.

In an interview last Friday night during the Annual Reception of the Banking Community, Finance Secretary Carlos Dominguez said the delay in the passage of the 2019 budget has deferred the implementation of projects, and therefore affected economic activity.

Specifically, he said government spending in the first quarter may fall by P46 billion, which is opportunity wasted to implement infrastructure projects.

“I just computed it, the budget delay cost the government P46 billion for the first quarter. In other words, we cannot spend P46 billion of what we planned to do. You know how much P46 billion is? Half a billion a day. That is the amount of money that is not circulating, that is not going to serve the public with infrastructure projects,” Dominguez told reporters.

The finance chief said the delay also cut time away from the construction of infrastructure projects, which is ideal to conduct during the start of the year.

“So our GDP for the first quarter is certainly going to be affected,” he said.

The Senate last week approved on third and final reading the P3.757 trillion proposed national budget for 2019. The bicameral conference committee targets to have the 2019 GAA ratified by Feb. 6.

In the meantime, the government is running on a reenacted budget.

Despite this, as well as the headwinds faced by the global economy, Dominguez earlier said the government is still maintaining an economic growth target of seven to eight percent this year.

The economy grew by a slower 6.2 percent in 2018, missing the government’s revised target of 6.5 percent to 6.9 percent. This is also slower than the 6.7 percent gross domestic product (GDP) growth recorded in 2017.

Earlier, Budget Secretary Benjamin Diokno said the government must wait for the approval of the 2019 budget before it can commence the rollout of new projects. He said capital expenditures cannot be reenacted based on the assumption that projects funded in 2018 are already obligated or done.

As a result, the DBM estimates that government disbursements in the first quarter may decline by around P44 billion.

Due to its impact on spending, economic managers earlier said the implementation of a reenacted budget may have negative impact on the country’s economic growth.

Latest estimates from the National Economic and Development Authority (NEDA) also showed that a reenacted budget could slash GDP growth by 1.1 to 2.3 percentage points in 2019 if implemented for a whole year.