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THE head
of the Senate economic affairs panel said the Arroyo
administration needs an additional P15.6 billion to
adjust the government’s 2008 spending program to
prevailing high prices triggered by double-digit
inflation.
This,
even as Socioeconomic Planning Secretary Ralph Recto
said the proposed P1.4-trillion budget for 2009 would be
enough to attain growth targets for that year, or a
range of 6.1 percent to 7.1 percent. The proposed outlay
is 15 percent higher than this year’s.
Speaking
on the gap created in this year’s spending budget by
inflation, Sen. Loren Legarda said the national
government, being the country’s
single-biggest consumer, is also adversely affected in a
big way by soaring commodity prices, just like most
Filipino consumers.
“On
account of higher prices of goods and services, we
reckon the government would need an additional P15.6
billion to adequately fund this year’s spending program,
as outlined in the national budget,” the senator said.
Her
estimate was based on a Department of Finance projection
that government expenditures increase by P2.6 billion
every time the inflation rate goes up by a percentage
point.
She
noted that Congress passed this year’s P1.24-trillion
national budget on the assumption that the inflation
rate would average only 5 percent, at most.
Legarda
added, however, that due to rising oil and food prices,
the Bangko Sentral ng Pilipinas (BSP) now expects the
inflation rate to average up to 11 percent this year.
“The
P15.6 billion is the result of the
[six-percentage-point] difference between the BSP’s
11-percent projection and the 5 percent presumed in the
budget, multiplied by P2.6 billion,” she explained. The
National Statistics Office reported earlier this month
that the nationwide inflation rate surged to 12.2
percent in July, the highest in 17 years.
Inflation is defined as a sustained increase in the
general level of prices for goods and services. It is
measured as an annual percentage increase. As inflation
rises, every peso earned by a household buys a smaller
percentage of a product or service.
Legarda
noted that the July inflation rate meant that consumers
had to shell out 12.2 percent more in July for the same
basket of goods that they bought in the same month in
2007. July was the second month in a row that the
inflation rate stood at double-digit levels. The
inflation rate was 11.4 percent in June; 9.5 percent in
May; 8.3 percent in April; 6.4 percent in March; 5.4
percent in February; and 4.9 percent in January.
Thus
far, she added, the inflation rate already averaged 8.3
percent in the seven months to July.
“This
really underscores the need for the government to
aggressively fight consumer price increases, which have
been hurting ordinary Filipinos and the government,” the
senator said as she renewed her call for the government
to increase infrastructure spending, particularly for
agriculture.
She
explained that building up farm systems would not only
provide more income for growers and new jobs for rural
workers, but also ensure abundant food supply, which is
crucially important to fighting inflation. “Robust farm
production is the best way for us to guarantee
affordable food. As long as we have ample supply of food
that is within reach of ordinary families, we can fight
inflation.”
At the
same time, Legarda pointed out that the single-biggest
driver of unusually high inflation since March was not
elevated oil prices, but the surge in the cost of rice,
due to previous reports of massive shortages of the
staple. “Food-price inflation has definitely been
driving up the overall inflation rate. And the only way
we can fight this is by producing more food more
efficiently.”
She said
the extra P15.6 billion needed to adjust the
public-spending program to higher prices could erode any
extra value-added tax (VAT) revenues that the government
hopes to collect this year. The government collected a
total of P53.31 billion in VAT revenues in the first six
months to June—P9.6 billion or 18 percent higher than
the amount generated over the same period in 2007.
Meanwhile, in the face of the global economic slowdown,
especially in the Philippines’ main trading partners,
the National Economic and Development Authority (Neda)
remains confident the P1.4-trillion budget for 2009 will
be enough to attain growth at a range of 6.1 percent to
7.1 percent.
Neda
Director General Recto said next year’s budget is 15
percent higher than this year’s and will be able to fuel
the desired economic advance amid difficulties.
Apart
from a higher budget, Recto said what would help work
for the country is higher absorption by departments of
their budgets, so that all planned projects are
sufficiently financed.
“The key
is to get departments to spend their budgets. The
biggest chunk of the budget will go to the Department of
Public Works and Highways, then to the Department of
Agriculture and Department of Agrarian Reform combined,
followed by the Department of Transportation and
Communications, Department of Education and the
Autonomous Region in Muslim Mindanao,” Recto said.
Recto
expects the 2009 budget to significantly contribute to
economic growth since most of the spending plans are for
infrastructure—about 22.2 percent of the entire budget.
On
factors that affect growth, Recto said the Development
Budget Coordination Committee (DBCC) sees inflation to
hit 6 percent to 8 percent next year, still due to
higher oil prices.
Recto
said the government sees oil prices playing within the
range of $115 to $125 per barrel while the peso is
projected to average P45 to a dollar.
Interest
rates, on the other hand, will be within the range of 5
percent to 6 percent in 2009 while exports and imports
are seen to hit 7 percent and 10 percent, respectively.
Earlier,
Recto said high inflation has forced the Neda to
decrease its forecast for the second quarter this year
to lower than the 5.2 percent posted in the first
quarter of the year.
Recto
said high oil prices in the second quarter, when rice
prices increased to almost P50 per kilo, will result in
lower growth.
The DBCC
recently slashed the growth targets for 2008 to 5.5
percent to 6.4 percent. Initially, the target was pegged
at 5.7 percent to 6.6 percent.
Recto
sees the second half of the year as better than the
first half because the effects of high oil prices in the
second quarter will be blunted by spending in
preparation for the holidays, and the expected higher
remittances of those working abroad.
The
National Statistical Coordination Board (NSCB) will
release the second quarter figures on Thursday, August
28, in Makati City. |
