The economy could have grown 7.2 percent in the first quarter if lawmakers immediately ironed out their differences and passed on time the P3.7-trillion national government budget for 2019, a top official of the Finance Department said Monday.
Finance Undersecretary Gil Beltran said in an economic bulletin the government underspending of P69.5 billion in the first quarter reduced GDP growth by 1.6 percentage point.
This was offset by election spending of candidates and lower inflation which had a combined impact of about 0.7 percent of GDP and boosted household consumption by 6.3 percent in real terms, he said.
“If the budget was approved as scheduled and disbursements were made promptly, GDP growth in the first quarter would have risen to 7.2 percent,” Beltran said.
The Philippine Statistics Authority said last week the gross domestic product grew at a four-year low of 5.6 percent, slower than 6.5 percent registered in the same quarter last year and 6.3 percent in the fourth quarter as government expenditures grew by only 0.08 percent compared to 25.4 percent in the same period last year.
Beltran said on the expenditure side, the lower growth could be traced to a moderated growth in both government consumption and capital formation/investment, which grew by 7.4 percent and 6.8 percent, respectively, compared with 13.6 percent and 10.3 percent in the same quarter in 2018.
“The slowdown in capital formation is explained by the significant contraction in public construction by 8.6 percent compared to 22.6-percent growth in the same quarter of 2018. This is slightly tempered by 8.6-percent growth in private construction compared to 8.1 percent in the same quarter of 2018.” Beltran said.
He said that on the supply side, agriculture decelerated to 0.8 percent in the first quarter. This confirmed that the El Niño dry spell had affected the sector.
The industry sector also slowed, weighed down by mining and quarrying, manufacturing activities and construction.
Economic Planning Secretary Ernesto Pernia said the re-enacted budget sharply slowed the pace of economic growth in the quarter.
President Rodrigo Duterte finally affixed his signature on the P3.7-trillion national budget for 2019 in April after a couple of months of the impasse between the two houses of Congress.
Pernia remained optimistic going forward, saying that to reach the full-year growth target of 6 percent to 7 percent, the economy would need to expand by an average of 6.1 percent over the next three quarters.
“This is still achievable given the current performance of the private sector and if the government sector is able to jumpstart and speed up the implementation of its new programs and projects,” Pernia said.
Finance Secretary Carlos Dominguez III said he was expecting the domestic economy to expand at a higher clip for the rest of the year as inflation continued trending towards the official target range of 2 percent to 4 percent and the government was committed to accelerate the implementation of infrastructure and human capital development projects.
Dominguez said the 5.6-percent growth in the first quarter was nonetheless a “decent expansion” that kept the Philippines among the ranks of the region’s fastest-growing economies.