Gov’t told to expand funding sources, rein in spending to hit growth targets

The government of Philippine President Ferdinand R. Marcos, Jr. should expand its funding sources and manage spending to meet economic growth targets this year, according to lawmakers.

This was after analysts said the dry spell brought by El Niño could temper growth this year.

“We need to strike a balance between… [what is] realistic and [what is] aspirational,” Marikina City Rep. Stella Luz A. Quimbo told BusinessWorld on the sidelines of a House of Representatives hearing last week.

Ms. Quimbo, who is also a senior vice chairperson of the House Committee on Appropriations, noted that growth slowed last year due to a huge contraction in state spending in the second quarter.

Government spending slowed to 4.3% amid red-hot inflation and rising interest rates.

Albay Rep. and House Committee on Ways and Means Chairman Jose Ma. Clemente S. Salceda brushed off calls to revise growth targets but cited the need to manage government spending.

“We saw that (slow government spending) coming,” he said in a Viber message. “That’s why the House initiated a policy of broadening the sources of funding for unprogrammed allocations in the 2024 General Appropriations Act.”

Congressmen in November approved on third and final reading a bill that would allow the government to tap excess funds of government-owned and -controlled corporations (GOCC) in funding unprogrammed budgets.

Finance Secretary Ralph G. Recto said last week the government might have to adjust its fiscal targets for the year to be “more realistic.”

Economic managers are targeting 6.5% to 7.5% GDP growth this year under the Development Budget Coordination Committee’s (DBCC) latest macroeconomic assumptions.

It also projects a growth target of as much as 8% in 2028 under its medium-term fiscal and growth goals. Philippine economic growth slowed to 5.6% last year, falling short of the state’s 6-7% goal.

Mr. Recto said DBCC’s entire medium-term fiscal framework is under review. “The fiscal plan was made when (Mr. Marcos) became president in 2022,” he told reporters. “There was no war in the Middle East, the Ukraine war had just begun. Thereafter, prices of food and oil rose.”

Former Finance Secretary Margarito B. Teves in an interview last week said the government should revisit its economic growth targets “to have more conservative assumptions.”

“We have to really go back to the assumptions that brought about the target of the government,” Mr. Teves separately told BusinessWorld on the sidelines of the hearing.

Raul V. Fabella, a retired professor from the University of the Philippines School of Economics, said the government might miss its fiscal goals this year due to El Niño.

“We might not meet the target because of the many issues,” he told reporters last week. “We have El Nino, floods in Mindanao, a dry spell in Negros, etc.”

The economy shrank by 0.5% in 1998, when the country experienced the worst El Niño dry spell in history.

Economic managers expect that the National Government’s budget deficit to hit P1.39 trillion this year, or 5.1% of GDP.

Under its fiscal framework, revenues are expected to account for 15% to 16% of GDP, while expenditures will be about 20%.

“Overall, especially in view of the prospect of lower Fed rates, I think this year will be better for growth,” Mr. Salceda said. – Beatriz Marie D. Cruz, Reporter