March 14, 2019
THE National Economic Development Authority (NEDA) has again warned that failure to pass the 2019 budget will stunt the Philippines’ economic growth, a day after government data revealed the country’s trade deficit widened by $600 million year-on-year in January. Yet against this backdrop of hard evidence of the negative impact of their obstinacy, lawmakers have still not found a way to send the measure to President Rodrigo Duterte’s desk for his signature.
In a statement on Wednesday, Socioeconomic Planning Secretary Ernesto Pernia said that full-year GDP growth could drop to as low as 4.2 percent if the P3.757-trillion budget for 2019 was not approved and the government was forced to operate with the reenacted 2018 budget for the entire year.
If the 2019 budget were finally enacted next month, Pernia said, 2019 growth would be limited to 6.1 to 6.3 percent. If the budget impasse were to last until August, economic expansion would only be from 4.9 to 5.1 percent, the NEDA chief explained.
Trade data released on Tuesday for the month of January provided strong evidence for NEDA’s assertion that the budget delay would cause slower growth. January’s trade deficit widened slightly to $3.76 billion in January from $3.75 billion in December 2018, but more significantly from the $3.16-billion gap recorded in January 2017. Overall, imports rose by 5.8 percent year-on-year in January, while exports fell by 1.7 percent.
While the overall picture is not much different than it has been in any other month in the recent past, a closer look at the numbers reveals some disturbing trends. After months of double-digit increases, the import growth of raw materials and capital goods both slowed dramatically; imports of raw materials and intermediate goods registered growth of just 2.2 percent in January, while import growth of capital goods slowed to 8.9 percent.
These figures indicate that in spite of the government’s intentions to boost spending this year, doubts are beginning to set in and the private sector is slowing its pace of investment. Capital spending plans are not necessarily being changed, but they are being pushed back.
The uncertainty is even more apparent in specific commodities, particularly those associated with construction and the government’s “Build, Build, Build” infrastructure development plans. Imports of industrial machinery and equipment and iron and steel would be expected to grow dramatically in anticipation of the roll-out of scores of planned infrastructure project. Machinery and equipment, however, expanded by just 4.6 percent in January from a year earlier, while iron and steel imports actually decreased by 8.7 percent.
All of these figures are clear indicators of slowing growth, exactly the problem NEDA on Wednesday warned would happen if the budget was not passed. Considering that it takes about a month from the time Congress sends the measure to the President until it is formally enacted, due to the need for the Department of Budget and Management to review the appropriations bill and make line-item veto recommendations to President Duterte, every day that passes without a resolution pushes the economy closer to NEDA’s worrisome scenario.
President Duterte for his part is doing what he can to resolve the budget impasse, even setting a meeting of the House and the Senate with him on Tuesday night, but the lawmakers “failed to reach a consensus,” according to Malacañang.
With growing signs that the budget fight is creating collateral damage on the economy, it is well past time for the House and Senate leadership to work together for the greater good.
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