Deferring balanced budget won’t harm economy – Canlas

The government’s move to postpone its balanced budget goal to 2010 will not necessarily be harmful to the economy as long as borrowing costs remain low, former Socioeconomic Planning Secretary Dante Canlas said yesterday

Canlas, who served as Socioeconomic Planning Secretary in 2001, said a budget deficit may not always be bad for an economy, especially for a developing country like the Philippines.

“From a budget deficit of P210 billion in 2002, we now have roughly P60 billion. This is only about one percent of our gross domestic product (GDP). That is still within acceptable levels as long as we keep the deficit below five percent of GDP,” Canlas said.

The government has decided to postpone it balanced budget goal to 2010 instead of this year as it needs to provide funds for additional spending. As such, the government expects to incur a budget deficit of P75 billion this year.

Canlas, however, said that interest rates should remain at low levels.

 “What government must look out for is that interest rates should not go up, as this will discourage borrowings and investments,” Canlas said.

On government subsidies, Canlas said this is helpful as it would be an immediate response of government for the global economic crisis affecting the country.

 “This is a proportional response of government for what I see as a temporary economic crisis. The poor needs these emergency subsidies for them to be able to cope with the crisis and President Arroyo is on the right track,” said Canlas.

As this developed, BIR Deputy Commissioner for Legal and Enforcement Gregorio Cabantac said government’s plan to boost spending would bode well for the economy.

 “The funding came from the value added tax (VAT) and from government savings,” said Cabantac.

President Arroyo is being criticized by the opposition for giving out mere “dole-outs” to the poor, claiming these will keep the poor in perpetual state of dependency and poverty.

Government subsidies include cheap rice at P18.25 per kilo; P2 per liter subsidy for diesel fuel; P295-million fertilizer subsidy for Mindanao farmers; P500 power subsidy to four million Meralco lifeline users, amounting to P2 billion; P1-billion fund for scholarships and student loans; P1-billion loan fund for the conversion of jeepney and bus engines to allow liquefied petroleum gas (LPG) and compressed natural gas (CNG) use.