By Luisa Maria Jacinta C. Jocson, Reporter
THE NATIONAL Government (NG) may likely miss its spending targets this year, which could potentially weigh on economic growth, analysts said.
“We expect the National Government to miss their spending targets for the year given the gap between program and actual (expenditures),” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.
The budget deficit narrowed by 2.89% to P983.5 billion in the first nine months, but it was 11% lower than its program for the period, data from the Bureau of the Treasury (BTr) showed.
Government revenues rose by 6.79% to P2.84 trillion, surpassing its target by 2.98%. However, state spending went up by 4.12% to P3.82 trillion but missed its target for the period by 1.06%.
The government has set a budget deficit ceiling of P1.499 trillion this year, equivalent to 6.1% of the gross domestic product (GDP). The program consists of P3.729 trillion in revenues and P5.228 trillion in expenditures.
“Although we do note a pickup in spending in the third quarter, we believe that challenges related to the devolution of certain expenditure to the local government units (LGU) level may be hampering the ability for spending to pick up in a considerable and sustained manner,” Mr. Mapa said.
Ateneo de Manila University economics professor Leonardo A. Lanzona said the year-to-date fiscal deficit is only over 60% of the full-year deficit program, noting that revenues have also lagged behind spending.
“The government spending was indeed pretty low for the whole year, but after raising spending to spur growth in the last six months of the year, the revenues have not kept pace with the programmed expenditures for the year,” Mr. Lanzona said in an e-mail.
“The problem apparently is the failure to spend because of limited funding apart from revenues. In order to engage in deficit spending, resources other than tax revenues need to be available. However, it seems that the government has not been able to obtain these nontax generated resources in order to support its deficit spending,” he added.
Filomeno S. Sta. Ana III, coordinator of Action for Economic Reforms, said that the government has so far “underperformed” in both generating revenues and ramping up spending.
“The government’s actual conduct to narrow the deficit is to underspend. (It’s) bad for growth,” he said via Facebook Messenger.
Mr. Mapa also noted the potential impact of slow government spending on gross domestic product (GDP) growth this year.
“We have already witnessed the negative impact on underspending with second-quarter GDP sliding to 4.3% after the -7.1% performance of the National Government,” he said.
The economy grew by a weaker-than-expected 4.3% GDP growth in the second quarter, slower than the 6.4% growth in the first quarter and 7.5% a year ago. It was also well below the government’s 6-7% target this year. The Philippine Statistics Authority (PSA) is set to release third-quarter GDP data on Nov. 9.
After the 7.1% contraction in government expenditures in the second quarter, the Finance department has ordered agencies to come up with catch-up plans for spending.
Mr. Lanzona said that the government will need to focus on strengthening the domestic economy to support growth.
“In effect, the government economic programs have been limping instead of sprinting despite the higher tax revenues, it is crucial to focus more on preparing the local economy to adapt to current economic and technological trends, instead of spending time abroad looking for foreign investments, in order to avail of loans and added borrowings to pursue their programs,” he said.
“With the recent hike in interest rates, the problem seems to have worsened, and the government is stuck to this lower budget deficit as it becomes more and more difficult to avail of outside funds,” he added.