BSP chief says government needs to spend more

CEBU, Philippines – The Philippines' full-year economic growth target is now a challenge to achieve, a top central bank official claimed but said this should call for more public spending to boost the economy.

"As the economic managers said during the budget deliberation before the Congress and Senate, it would be a challenge to hit [even] the lower end of the target," Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said in an interview with reporters in Cebu City last week.

The government has set a 7-8% full-year growth target this year.

Guinigundo said the government needs to spend more for infrastructure and social services to further boost growth.

"We should see more of the PPP (public-private partnership) projects that have been approved launched and taken off the ground," said Guinigundo, adding the country needs infrastructure projects that could further increase its capacity to grow.

"We also need the private sector to invest some more. In other words, this is everybody's business," the BSP official pointed out.

The country's gross domestic product (GDP) in the second quarter grew 5.6%, picking up from the revised 5% growth in the first. However, last quarter's growth was lower than the 6.7% recorded in the same period last year.

The Philippine Statistics Authority (PSA) earlier announced the first-quarter GDP growth was found slower than the initially reported 5.2%. For the first semester, economic expansion grew 5.3%.

The growth recovery last quarter was due to improved government spending especially in public construction, Socioeconomic Planning Secretary Arsenio Balisacan said in an earlier statement. Slow state spending was the main factor blamed for the dismal growth in the first quarter.

"Despite the GDP number hitting slowly below the government's target, we recognize that it is much more important to ensure that the growth momentum is sustained," the chief economic planner noted.

Balisacan claimed that there is a need to revisit the targets, saying it's very likely to scale down the figures.

He though said that the 5.6% Philippine growth last quarter is currently the third highest in Asia, next to China and Vietnam.

Guinigundo believed there should be no reason for the economy to hit a high level of growth than what it achieved in previous quarters, given its sustained fundamentals.

"The economy is growing, inflation is very benign and the amount of liquidity and credits available are more than sufficient at this point," the deputy governor explained.

The official added that domestic consumption continues to fuel the economy, noting also the big contribution of remittances from Filipino workers abroad and the business process outsourcing (BPO) sector to Philippine growth.

He said the Philippines should be able to grow and expand more, noting that it has what "it takes to grow more than what is expected".