THE National Economic and Development Authority (Neda) warned lawmakers that a reenacted budget for next year will be disastrous as this will limit economic opportunities for an expanding Philippine population.
During the first hearing on the proposed national budget at the House of Representatives on Thursday, Socioeconomic Planning Secretary Ernesto M. Pernia said GDP growth could fall below 5 percent if the budget is not passed on time.
Based on historical data compiled by the BusinessMirror, this level of GDP growth has not been seen by the Philippines since 2011, when economic expansion reached 3.7 percent.
“We will have a regressing economic performance. [Growth] will probably be below 5 percent,” Pernia told lawmakers.
Pernia said this does not bode well for an expanding Philippine population. While the rate of the country’s population growth is slowing, he said the actual number of Filipinos continues to increase.
The Philippine Statistics Authority (PSA) estimated that the country’s population will reach 107.288 million in 2019 and further increase to 115.378 million by 2025. A high population will limit the opportunities in the economy, especially if the economy is not doing well.
The budget delay, Pernia said, caused the country’s GDP to grow by only 5.5 percent in the first semester. Economic expansion in the first and second quarters reached 5.6 percent and 5.5 percent, respectively.
“We have many needs, infrastructure needs, and therefore government spending and even private spending on fixed capital formation will be hampered by a reenacted budget of 2020. That’s why we are praying, we are hoping that it’s not going to happen again,” he said.
Targets
As it is, Pernia said the country is already behind some of its macroeconomic targets. This makes it more difficult for the government to meet its full-year growth goal of 6 percent to 7 percent.
Due to the lower-than-expected economic performance, Pernia said the GDP growth must reach 6.4 percent in the second semester to meet the low-end of the full-year target.
Gross National Income (GNI) per capita targets have also fallen behind. The target increase in GNI per capita for 2018 and 2019 is 5 percent, but the actual figure reached only 4.1 percent last year and 3.5 percent as of the first semester.
Slower GNI per capita expansion will make it difficult for the Philippines to become an upper middle income country this year. Pernia said this goal may be met by 2020, but this would largely depend on the performance of the economy.
Efforts to meet the poverty and subsistence incidence targets are also faltering as the average poverty incidence in the first semester of 2018 was at 21 percent while the subsistence incidence was at 8.5 percent. The government’s target is 17.3 percent to 19.3 percent for poverty incidence and 6.8 percent for subsistence incidence for 2018.
The Philippine Statistics Authority (PSA) explained that the poverty incidence is “the proportion of families/individuals with per capita income/expenditure less than the per capita poverty threshold to the total number of families/individuals.”
PSA said subsistence incidence is “the proportion of families/individuals with per capita income/expenditure less than the per capita food threshold to the total number of families/ individuals.”
Job generation, Pernia added, was not on track. Neda data showed that as of the first semester of 2019, the economy created only 480,000 new jobs. The target for the year is 900,000 to as many as 1.1 million jobs.
Jobs created in 2017 and 2018 also fell below target. In 2017, the economy actually lost 663,000 jobs when the target was to create 900,000 to 1.1 million jobs. In 2018, employment generation only reached 826,000, also lower than the target of 900,000 to 1.1 million.
Other risks
On top of these challenges are risks to growth such as extreme weather events, power interruptions that affect manufacturing operations, and delays in various infrastructure projects. These will be compounded by the inability of local government units to fully utilize the resources given to them by the national government.