Government sticks to 7-8% growth target this year

MANILA, Philippines - With only three months left in the year, the economic growth target will no longer be changed even as the Aquino administration conceded that hitting just the low end of the goal would be difficult to achieve.

When asked if there is a plan to revise this year’s seven- to eight-percent growth target, Budget Secretary Florencio Abad told reporters on Monday night: “I don’t think so. Not anymore. What for?”

The Development Budget Coordinating Committee (DBCC) – which Abad chairs – has no scheduled meeting yet to revisit macroeconomic assumptions for this year and the next to take into account recent economic developments.

Growth – as measured by gross domestic product (GDP) – slowed to 5.3 percent in the first semester even after accelerating to 5.6 percent in the April to June period. Economic expansion during the first quarter was at five percent.

At the budget hearing in Congress last Monday, DBCC members, represented by Cebu Rep. Luis Gabriel Quisumbing, admitted the government is at least looking at capping growth this year at six percent.

That would require GDP to expand 6.6 percent in the second half, he added. Economic growth hit 6.1 percent in 2014.

“Yes, it is true the target range was not reached and growth for the first half was lower yet we recognize that the support coming from the expenditures of the government can still be sufficient to propel growth this year,” Quisumbing told the House plenary.

Asked for clarification, Abad said while it is already impossible to grow eight percent this year, seven percent remains an “aspirational” goal. For 2016, the 7.5- to 8.5-percent goal will be retained, at least for now.

 “That is three months away (before 2016 begins). Many things could happen before then,” the DBCC chair said.

As to what will support growth, Abad maintained that traditional drivers remain intact such as the expected boost in consumption during the Christmas season. Higher spending on goods and services drive companies to produce more, helping growth and employment in the process.

He also reiterated Quisumbing’s pronouncements on government spending, which had been trending below program and kept the budget deficit at only P18.5 billion as of July.

 “The indicators of spending show the trend continues. Deficit will be wider but to what extent it will widen, that is the question,” he pointed out.

 In July, state disbursements rose by a fourth from same period last year, the fastest expansion seen in 13 months. This was after months of slower increases - sometimes, even contracting - in expenditures that dented first-semester GDP growth.

The budget deficit - which indicates the government spent more than it collected in revenues - is capped at P283.7 billion this year, equivalent to two percent of GDP. As of July, only 0.6 percent of the budget space has been utilized.

Since 2011, the Aquino administration has been falling behind spending programs, resulting in lower-than-programmed deficit for the year.