Villar: Gov’t economic assumptions in ’06 budget unrealistic

Sen. Manuel Villar, chairman of the Senate committee on finance, has expressed concern that the macroeconomic assumptions used by the government for the 2006 national budget are unrealistic.

The 2006 national budget, which is expected to hit P1 trillion, will be submitted to Malacañang today during President Arroyo’s State of the Nation Address, signaling the start of the budget season in Congress.

"As early as now, we have to iron out whatever inconsistencies or disparities there are in the 2006 budget," Villar said.

Villar said every percentage point counts, and whatever budgetary assumptions that would be used should be realistic and responsive to existing economic indicators.

Otherwise, the budget would not be responsive to the real requirements of the people. "We have to be careful about these things," he said.

Based on a national budget memorandum of the Department of Budget and Management, the following macroeconomic assumptions should be used by government agencies in formulating their 2006 budgets: Gross National Product (GNP) growth rate, 6.5-7.5 percent; Gross Domestic Product (GDP), 6.3-7.3 percent; inflation rate, 4-5 percent; and a foreign exchange rate of P55-57: $1.

As of the first quarter this year, the actual macroeconomic indicators are as follows: GNP, 4.7 percent; GDP, 4.6 percent; and inflation 8.5 percent. The peso’s value to the dollar meanwhile has remained within its expected range.

According to Villar, the budget is an estimate of future expenditure, thus assumptions for inflation and currency rates should not be targets but should closely follow the current of immediate future trend.

The agencies must be guided in approximating real peso values rather than using ideal or objective values, he said.