May 24, 2019

Following discussions in the last two weeks, the Economic Development Cluster (EDC) has agreed on a strategy to catch up on economic growth given the four-year low GDP growth rate in the first quarter of 2019.

“A catch-up plan is imperative. The EDC estimates that the government under spent by close to PhP100 billion during the first five months of the year due to the delayed passage of the 2019 budget. That is around PhP750 million to PhP1 billion a day,” said Socioeconomic Planning Secretary Ernesto M. Pernia.

“To reach our full-year growth target of 6 to 7 percent, the economy will need to expand by an average of 6.1 percent over the next three quarters. This target is still within reach, should the private sector sustain its current performance and government be able to speed up the implementation of its ongoing programs and projects, and jump start new ones,” he added.

According to the Department of Budget and Management (DBM), actual government disbursement amounted to PhP778 billion in the first quarter of 2019. In order to hit the full year disbursement program of PhP3.774 trillion, government must spend PhP2.996 trillion for the second to fourth quarters of the year.

Actual infrastructure disbursements amounted to PhP207.2 billion in the first quarter. To reach the infrastructure-spending target of PhP1 trillion, government must disburse PhP792.97 billion for infrastructure from the second to fourth quarters.

The Department of Public Works and Highways (DPWH) and the Department of Transportation (DOTr) made a combined spending commitment of PhP803.1 billion for the next three quarters of the year.

Pernia said infrastructure disbursements from other agencies can further drive spending growth through the Armed Forces of the Philippines (AFP) Modernization Program of the Department of National Defense; the school-building program of the Department of Education; and the Health Facilities Enhancement Program of the Department of Health.

Government will also fast-track the implementation of priority programs such as the National ID System, the Pantawid Pamilyang Pilipino Program, unconditional cash transfers, and fuel marking program.

For his part, Agriculture Secretary Emmanuel Piñol said the Department of Agriculture is working on measures to improve the performance of agriculture this year. He pointed out the need to maximize productivity through coconut-based inter-cropping schemes and to build more processing facilities in villages to address low prices of copra. Among the proposed solutions was also a fund allocation to complete a 12,000-kilometer farm-to-market-road network nationwide to help bring down the cost of basic food commodities.

“Besides feeding people, another importance of agriculture is that it is a feeder sector to industry, for food manufacturing in particular, which is the biggest subsector under manufacturing. So if the agriculture sector underperforms, manufacturing is also affected,” said Pernia.

In the power sector, government is keen on mitigating the effects of El Niño by ensuring power plants have minimal forced outages, managing maintenance schedules, as well as proposing a hydro management mechanism of existing hydroelectric power plants.

All these considered, DBM will continue to monitor disbursement performance of agencies considering the cash-based budgeting scheme under the 2019 General Appropriations Act.

Meanwhile, according to the Export Development Council, merchandise exports, which have been on a downtrend lately, are expected to grow by 6.1 percent this year—4 percent for goods, and 9 percent for services.

Major exports that showed decline in the first quarter were agriculture, manufacturing, electronics, coconut, processed fruits, tuna, shrimps, sugar, wood manufactures, and chemicals. The decline was largely due to weakening global growth, market access (e.g., increased non-tariff measures of some trading partners), logistics and infrastructure issues (e.g., port congestion and traffic), and policy issues.

“As regards policy, we are urging Congress to pass critical reforms such as the amendments to the Public Service Act, the Foreign Investment Act, and the Retail Trade Act to encourage investments in industry and services, and boost private construction. That would have a significant contribution to the economy. The Economic Development Cluster is also endorsing the Philippine Export Development Plan 2018-2022 for the President’s signature,” said Pernia.

“This is a whole-of-society effort, thus we are equally counting on the private sector to strenuously drive economic growth. The Ease of Doing Business (EODB) law can be a major driving force, so we need to speed up enforcing the law for the private sector to more actively participate in our catch-up plan,” he added.