NEDA: Delayed budget approval likely to slow down economy in 2019

The Philippines’ economic growth may slow down by 1.1 to 2.3 percentage points should Congress fail to approve the 2019 national budget on time and instead push for a reenacted budget, warned the National Economic and Development Authority (NEDA).

Based on a document disclosed to reporters, NEDA expects the economy to shrink by 1.1 to 2.3 percentage points if Congress pushes to reenact the 2018 budget for next year.

The contraction in growth could come as government spending, based on estimates from the Department of Budget and Management (DBM), may be reduced by P219.8 billion as a result of budget reenactment.

This means disbursements next year may reach only P3.526 trillion, falling below the original estimate of P3.746 trillion.

It is also estimated that employment could be reduced by as much as 600,000 if the budget is reenacted next year. Various sectors could be affected, including the construction, public administration and defence, wholesale and retail trade, land transport, and education.

As a result, NEDA said 200,000 to 400,000 Filipinos may fall into poverty next year should Congress fail to approve the budget before the end of the year.

Finance Secretary Carlos Dominguez expressed hope that Congress would immediately approve the 2019 budget, with only a few more sessions left this year.

“I believe its quite remote to have a reenacted budget. A reenacted budget is certainly not ideal because new projects cannot be embarked upon and old projects cannot be carried forward. So we just hope Congress can catch up,” Dominguez said in an interview yesterday.

Earlier, Budget Secretary Benjamin Diokno warned that reenacting the budget could delay the implementation of infrastructure projects and other capital expenditures for five months, and slow down GDP growth in the first two quarters of next year.

He explained that capital expenditures cannot be reenacted based on the assumption that projects funded in 2018 are already obligated or done. Hence, he said the government would need to wait for the approval of the 2019 budget before it can commence the rollout of new projects.

Economic managers pegged a GDP growth target of seven to eight percent next year.

Meanwhile, Dominguez said the DOF may have to take a back seat and wait until next year for the approval of the second package of the Comprehensive Tax Reform Program (CTRP).

“Too sad, but we will discuss again with them to see how we can push it. It’s the last session week and they still have to look at martial law, they haven’t finished the budget,” the finance chief said.

“We have to try again next year, I guess,” he said.

However, the secretary said it would be risky to delay the approval of the measure until next year, with the elections already near.

“There are some more sessions before the term of this Congress expires so we’ll see if we can finish it then if it cannot be finished this year. It’s a risk that it’s near the elections,” Dominguez said.

The second package of the CTRP seeks to reduce corporate income taxes, while rationalizing fiscal incentives.