IMF recommends lowering of PH's budget deficit program

TO ease the burden on monetary policy in managing inflation, the International Monetary Fund (IMF) recommended the Philippines to make adjustments in its budget deficit program.

The IMF recommends the government to adjust the budget deficit program to 2.4 percent of gross domestic product (GDP) in 2018 and 2019 from the its current deficit of 3.0 percent of GDP for 2018, 3.2 percent for 2019, and 3.0 percent for 2020-2022.

However, Finance secretary Carlos Dominguez III said in a statement that the proposed adjustments from IMF is seen as a “tough advice” given with the rapid implementation of infrastructure development program.

“Given deliberate improvements in our process, projects are in full steam to realize benefits envisioned in a timely manner. We do acknowledge that adjustments may be necessary to adequately respond to the changing macroeconomic landscape both internal and external,” Dominguez said.

He also added the interagency Development Budget Coordination Committee (DBCC) will still have to review the proposed adjustment by IMF.

For his part, Budget Sec- retary Benjamin Diokno said in a statement that they recognize the merit given by the IMF, but cautioned against the implication of abandoning certain infrastructure projects.

“We will subject the IMF Staff proposal to a thorough review. Reducing the budget deficit program to 2.4 percent of GDP is feasible. However, the implication of abandoning some of our big-ticket infrastructure projects is something we are not comfortable with. We are already gaining significant progress in our aim to accelerate infrastructure development to boost the country’s competitiveness and improve the quality of life of Filipinos. We do not intend to slide back,” Diokno said.

Philippine economic managers said the elevated inflation this year is caused by factors that are one-off and transitory. These include rise in global oil prices, the imposition of excise tax on sugar sweetened beverages and higher excise tax on tobacco, as well as supply related problems for rice.

Department of Finance (DOF), Department of Budget Management (DBM), and National Economic and Development Authority (NEDA) secretaries said the medium-term budget deficit ceiling takes into account the “Build Build Build” infrastructure development program. The program aims to boost infrastructure development program in the country.

Meanwhile, the IMF recently described the Philippine economy as “performing well,” forecasting continued 6.7 percent real GDP growth and below-4 percent inflation in 2019 while citing the country’s “prudent policies and critical reforms.”

The assessment comes after a team from the IMF visited Manila and Bohol from July 11 to July 25. Dr. Luis E. Breuer, the team leader, said “The Philippines has been one of the region’s strong economic performers over the past years, reaping the fruits of prudent policies and critical reforms. The team welcomes the authorities’ strategy of maintaining policy continuity, while adapting to emerging challenges, and taking advantage of the strong economy to implement reforms to improve inclusive growth and job creation. This strategy has served the Philippines well.”