PRESIDENT Aquino on Wednesday unveiled a P72.11-billion fiscal stimulus package of public-works and poverty-reduction projects to shield the Philippines from external pressures and boost economic growth through the first half of next year.
Addressing the Foreign Correspondents Association of the Philippines, Mr. Aquino said the global economic slowdown has affected regional growth, including the Philippines, but gave assurances the government is “indeed working overtime to make certain that we do what must be done to maintain our economy’s momentum.”
“I have authorized additional expenditures of more than P72 billion between now and the end of the year. This spending will provide added stimulus to our economy,” he said. “More than that, the effects of this stimulus package will be felt not just at the end of this year, but also in the first half of next year.”
The President said the “great thing” about the scheme was that the money would be funded from savings and the government’s existing borrowing program.
“We want to put ourselves in a position to grow faster when the world recovers,” Finance Secretary Cesar Purisima told reporters. “When markets abroad weaken, no economy will be unaffected. The only question is how much growth will be affected and what we’re doing is to help counter the slowdown.”
Sen. Franklin Drilon, however, expressed “serious doubt” on the ability of the government to accelerate spending with just a little more than two months remaining in the year.
“Given the lateness of the year, the effect on the domestic economy due to this accelerated public spending may be felt next year,” Drilon told the government’s economic managers at a briefing by the Development Budget Coordination Committee on Wednesday.
He recalled that the January-August disbursements stood at P947.2 billion, and noted that the slack in government spending resulted in only a 4-percent economic growth in the first half, which was way off the 7-percent to 8-percent target.
Drilon surmised that the economic managers may have opted to be prudent in spending to manage the ballooning budget deficit in order to get a better credit rating.
At the same time, Senate President Juan Ponce Enrile noted that the Aquino administration has already finished the assessment of many of the pending projects and is now ready to launch an economic construction, recovery and progression in the country given that the President had completed one year and has only five years more in his term.
“So, I think personally, I would look at it as a very cautious handling of the national interest, especially the economy. They have to study what they inherited and refine it, modify it, and probably now they are ready to spend massively in order to make the growth of the country faster,” Enrile said.
The Philippines became the first Asian nation outside Japan to announce a stimulus plan this year to bolster slowing growth.
“This is a positive movement for the domestic economy, especially if the central bank wants to remain on hold for the rest of the year,” said Betty Rui Wang, a Hong Kong-based economist at Standard Chartered Plc. “But the current package is quite small. I doubt whether the impact will be substantial.”
Investor reaction to the stimulus plan was rather muted. The Philippine Stock Exchange Index rose 0.3 percent on Wednesday, while the peso, which had its worst monthly loss since May 2010 in September, rose less than 0.1 percent at the close of trading, according to Tullett Prebon Plc.
“If the fiscal stimulus does its job, this should give the necessary push to keep our economic growth in a solid upward trajectory,” Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said on Wednesday, adding that the Philippines has sufficient liquidity—the total money in circulation—a stable exchange rate and a “manageable” inflation outlook along with “fiscal space” to help support economic growth.
The BSP will consider global developments, including Indonesia’s rate cut and the slump in Philippine exports in next week’s policy meeting, Tetangco said.
“In most jurisdictions, inflation seems to have become less of a pressing concern,” he said. “The weakness in advanced economies is seen to weigh more on emerging economies than previously anticipated.”
Aside from the stimulus package, the President said the Philippines is also diversifying its product markets by strengthening trade with the BRIC countries of Brazil, Russia, India and China, South America, Mexico and Southeast Asia to compensate for the slowdown in the United States and Europe.
“We will not fold under the weight of these difficulties; instead we will have opportunities to excel. We will do what we can within the bounds of fiscal prudence to keep the economy growing and to make certain that the effects of this growth are felt more widely,” Mr. Aquino said, adding that the stimulus package will “have no impact” on next year’s deficit target.
The government narrowed its budget deficit target for this year to 2.6 percent of gross domestic product (GDP), or about P260.6 billion, from a previous goal of 3 percent, or about P300 billion, Purisima said. Officials kept the goal for 2012 at 2.6 percent of GDP or about P286 billion, he said.
According to Budget Secretary Florencio Abad, of the total amount, P37.92 billion will be released to national government agencies; P7.25 billion to local government units; and P26.9 billion to government-owned or -controlled corporations (GOCCs).
“Funding will be sourced from pooled savings from unused appropriations in 2010 and 2011, windfall revenue from GOCC dividends, and realignments within agencies in favor of fast-disbursing projects,” Abad said in a statement.
“While there was a turnaround in our disbursement performance in August, it was not enough,” he said and this is why President Aquino instructed the government “to execute these additional projects to bolster economic growth in 2011.”
Broken down further, the stimulus package allots P5.5 billion for the construction and rehabilitation of roads, bridges, flood control and other projects, many of which had been damaged in the recent typhoons.
The Department of Agriculture (DA) will construct and rehabilitate P1.62 billion worth of irrigation, farm-to-market roads and other infrastructure, while additional funding requirements will be released for the Mindanao Rural Development Project (P919 million) and the Agno River Integrated Irrigation Project (P411 million).
Abad said P1.29 billion will be released for the Agrarian Reform Communities Project 2 of the Department of Agrarian Reform (DAR), while the Department of Budget and Management (DBM), in partnership with the National Statistics Office, the DA and DAR will conduct a P625-million National Survey of Farmers and Fisherfolk.
Abad said P6.5 billion will be provided to local government units that are “almost completely dependent” on their internal revenue allotment (IRA) for the construction of arterial roads, rural electrification and “other priority projects that have economic impact, preferably directed to poor sectors and communities.”
“This is being provided in light of the anticipated reduction in IRA in 2012. In addition, P750 million will be provided as development assistance to Quezon province in line with the settlement of National Power Corp. tax liabilities. Likewise, another P6.5 billion will be allocated for the various other programs and projects,” Abad said.
The budget chief said P11.5 billion will be released to the National Housing Authority for the resettlement of informal settlers in dangerous areas (P10 billion) and housing for Bureau of Fire Protection and Bureau of Jail Management and Penology personnel (P500 million), among others.
About P400 million will be released to the Home Guarantee Corp. as equity infusion for its credit insurance and mortgage guaranty operations.
Some P1.5 billion will pay for premium subsidies for indigents under the National Health Insurance Program, P249 million for the hiring of nurses and midwives to be deployed to rural areas, and P357 million for the upgrading of the physical plant and medical equipment of the Philippine Heart Center.
Another P280 million will go to the renovation and purchase of equipment of the Philippine Children’s Medical Center and P35 million for the pediatric pulmonary program of the Lung Center of the Philippines.
A total of P1.87 billion will rehabilitate the Light Rail Transit Lines 1 and 2, while the Metro Rail Transit will get additional train cars worth P4.5 billion.
The government will also implement an P8.59-billion Comprehensive Peace and Development Intervention package to support the peace process in Mindanao, while the Payapa at Masaganang Pamayanan program will get P1.82 billion more for peace and development activities with the Cordillera People’s Liberation Army and the Moro National Liberation Front; support for the reintegration program of former rebels of the New People’s Army; among others.
The government has also set aside P1.1 billion in subsidies for the training of applicants, faculty-trainers and other activities, in the business-process outsourcing industry and other key growth industries; and P425 million to improve the weather-forecasting capacity of the Philippine Atmospheric, Geophysical and Astronomical Services Administration.
Abad said the stimulus package will be funded by unreleased appropriations for personal services in 2011, to be pooled as savings and realigned (P30 billion); unreleased appropriations for discontinued or slow-moving projects in 2011 (P482 million); and the realignment of 2011 budgetary items within agencies in favor of fast-disbursing projects (P7.75 billion).
It will also be covered by the 2010 unprogrammed fund to be supported by windfall dividends from GOCCs (P12.34 billion) and unreleased appropriations for discontinued or slow-moving projects in 2010, which are carried-over as pooled savings in 2011 (P21.54 billion).
(With VG Cabuag, Butch Fernandez, Bloomberg News)
