Former BSP exec hits govt spending ‘failure’
LIMITING government spending should not come at the expense of economic growth, a former Bangko Sentral ng Pilipinas (BSP) official said on Monday.
Writing for the New York-based think tank GlobalSource Partners, former BSP deputy governor Diwa Guinigundo particularly criticized Socioeconomic Planning Secretary Arsenio Balisacan for saying that state spending growth was intentionally limited last year as part of fiscal consolidation efforts.
“It was intentional that the growth in government spending was not too high in 2023 because we want to achieve fiscal consolidation,” he quoted Balisacan as having said following the release of below-target 2023 growth data.
“That means lowering the fiscal deficit and government debt but still be able to provide enough for social protection.”
These statements, Guinigundo “unequivocally contradicted previous pronouncements of the economic managers, past and present, about the role of public expenditure in promoting higher output growth.”
Following a third-quarter rebound, government spending fell by 1.8 in the last three months of 2023, contributing to full-year economic growth falling below the 6.0- to 7.0-percent target at 5.6 percent.
“It is not good for the government to justify the failure of public spending to measure up to the demands of a growing economy…,” Guinigundo said, noting that government expenditures had slowed over the last three years in the aim of reducing deficits and debt.
The challenge for President Ferdinand Marcos Jr., he said, is to “prevail over his economic managers and his newly minted Principal Economic Advisor Frederick Go and Finance Secretary Ralph Recto” to ensure that use of the government’s budget be optimized for economic growth.
This will also require the passage of pending tax measures to raise revenues and ensure favorable loan terms should borrowings be required.
“It’s about time good governance produce[s] fiscal and debt sustainability without sacrificing economic prosperity,” Guinigundo said.
He noted that achieving this year’s 6.5- to 7.5-percent growth target would be even more challenging given increased domestic and external risks.
“The least the Philippines needs at this time is a distraction from constructive nation building, and it could easily come from such possible shocks as the country’s proposed Charter change and the economic and financial fallout from the territorial dispute between the Philippines and China,” he added.
How the BSP responds in terms of monetary policy, meanwhile, will shape the financial conditions needed to sustain economic growth, Guinigundo continued.
“It’s something to be the fastest-growing economy among the economies of the world, and it’s something else to ensure it is durable over the long run,” he stressed.