Pernia warns economy to slow further if 2020 budget is delayed too

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Metro Manila (CNN Philippines, August 22) — A member of President Rodrigo Duterte's economic team warned lawmakers that another delayed budget next year will weaken economic growth further, even as members of the House of Representatives assured they will approve the measure in two months.

The House Committee on Appropriations started its marathon hearings on the ₱4.1-trillion national budget for 2020 on Thursday, two days after the Department of Budget and Management (DBM) turned over the proposal to Congress. National Economic and Development Authority (NEDA) Secretary Ernesto Pernia quickly appealed for the House to ensure the enactment of the budget law within the year, warning that another delay would hurt the economy.

"It will just be reenacting the economic performance — meaning, we will have a regressing economic growth performance, probably below 5 percent or something in that order," Pernia said in response to questions of Minority Leader Rep. Benny Abante. "We have many needs, infrastructure needs, and therefore, government spending and even private spending on fixed capital formation will be hampered by a reenacted budget in 2020. That's why we are hoping, we are praying that it's not going to happen again."

The warning comes following a four-month delay in passing the ₱3.7-trillion budget for 2019. President Rodrigo Duterte only signed the measure on April 15, leaving new state projects unfunded during the first few months of the year. As a result, growth slumped to a four-year low of 5.26 percent in January-March and to 5.5 percent from April-June. If the budget was on time, Pernia said growth would have averaged 6.5 percent, not the current 5.5 percent level.

To hit the 6-7 percent target for the entire year, Pernia said the economy must expand by at least 6.4 percent from July to December.

"The marching order of the President, and which we agree, is we really have to speed up government spending on infrastructure so that we can catch up to the extent of raising the growth rate," the NEDA chief added.

Both the majority and minority blocs of the chamber have committed to passing the budget on time to avoid the long deadlock with the Senate which held back the passage of the 2019 spending plan.

House Majority Leader and Leyte Rep. Ferdinand Martin Romualdez said the chamber will hold marathon sessions, even including Thursdays and Fridays, from now until September to finish all budget discussions. A schedule released by the House on Thursday morning showed that the committee will go through the items in the budget until September 9, and must be up for plenary deliberations by September 20.

Third reading approval is targeted by October 4, giving the Senate another two months to go through the provisions. The budget is targeted for Duterte's signing into law by December 20.

The state intends to spend ₱4.214 trillion, with a fourth dedicated to its flagship "Build, Build, Build" infrastructure program. The government will borrow ₱1.4 trillion, 75 percent from local sources and the rest from foreign lenders, according to the President's budget message.

The proposed spending plan doubles the funding for the Department of Transportation to ₱147 billion to support big-ticket infrastructure projects. It also injects funds for the creation of the Bangsamoro Autonomous Region in Muslim Mindanao, the implementation of the Universal Healthcare Act, and the new Department of Human Settlements and Urban Development, to name a few.

The government is looking to raise ₱3.536 trillion in revenues next year, with ₱195.5 billion to be sourced from tax reform collections. These include additional duties from the Tax Reform for Acceleration and Inclusion law in effect since 2018, the newly-signed measure that raises the sin taxes on cigarettes and vapes, and the proposal to hike the duties on alcoholic drinks.