Stimulus package needed to boost growth - BSP

MANILA, Philippines - Monetary authorities said yesterday the planned P72-billion fiscal stimulus package of the Aquino administration would help pump prime the economy amid a stable exchange rate and benign inflation environment.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. told reporters that the decision of the government to step up spending in the remaining months of the year would bost economic activity after successfully keeping the budget deficit way below the programmed shortfall in the first eight months of the year.

“The fiscal stimulus will give the necessary push to keep our economic growth in a solid upward trajectory. There is sufficient liquidity in the system, the exchange rate is stable, and the inflation outlook continues to be manageable,” Tetangco said.

Latest data from the Bureau of Treasury showed that the government trimmed the budget deficit by 84.88 percent to P34.49 billion from January to August this year compared to P228.1 billion in the same period last year as revenues jumped 13.7 percent while government spending fell 8.12 percent.

The Aquino administration has committed to trim the deficit to two percent of GDP starting 2013 until the end of the term of President Aquino in 2016.

For this year, the government hopes to trim the budget deficit to P300 billion or three percent of gross domestic product (GDP) from a record level of P314.5 billion or 3.2 percent of GDP last year.

On the other hand, the BSP is confident that inflation would fall within the target of three percent to five percent this year and next year despite the economic uncertainties in advanced economies led by the US as well as the sovereign debt crisis in Europe.

Last September 8, the BSP lowered anew the central bank’ inflation forecast to 4.46 percent this year from the original 4.7 percent this year and to 3.4 percent instead of 3.74 percent next year.

For his part, BSP Deputy Governor Diwa Guinigundo explained that the fiscal stimulus program would help the government achieve the higher end of the revised economic growth targets.

“If the government is able to spend as much as it has projected in terms of the acceleration program and we hit the high-end of the range, that that’s is 5.5 percent, that is something that is noteworthy considering the uncertainties of the times,” Guinigundo explained.

The Cabinet-level Development Budget Coordination Committee (DBCC) has slashed the GDP growth forecast further to a range of 4.4 percent to 5.4 percent from the revised range of five percent to six percent for this year and to five percent to six percent instead of seven percent to eight percent for next year.

However, the government used a five percent to six percent GDP growth assumption for its 2011 Budget of Expenditures and Sources of Financing (BESF) and 5.5 percent to 6.5 percent for its 2012 BESF.

Meanwhile, the Aquino administration has lined up various projects to make up for its failure to boost spending in the first half of the year.

“While there was turnaround in our disbursement performance in August, it was not enough. That is why President Aquino instructed his government to execute these additional projects to bolster economic growth in 2011,” Budget and Management Secretary Florencio Abad said.

Projects include critical public works and agriculture infrastructure projects. There will also be housing, relocation and resettlement projects as well as additional funing support for local government units (LGUs).

In the area of healthcare, Abad said the government is increasing the number of healthcare beneficiaries.

Abad said funding for the P72-billion stimulus package would come from dividends from GOCCs, unspent budgets for 2010 and 2011 and realignments within agencies in favor of fast-disbursing projects.