May 11th, 2023
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) reiterated his call for the government to undertake a “spending catch-up plan” to “fortify the country’s economy from global headwinds and reap more benefits out of the budget earlier,” as the Philippine Statistics Authority reported today that the first quarter 2023 GDP growth rate was at 6.4%, the slowest in seven quarters.
“If you disaggregate the components of the economy, real growth in government final consumption expenditure is 6.2%, below the general economy. Without robust gross capital formation, which grew by a whopping 12.2% – meaning investments by the private sector – we would have seen a figure slower than 6.4,” Salceda said.
“The private sector, in other words, is carrying the day. But you have to remember that that is very sensitive to interest rate fluctuations, and this is a very volatile global environment,” Salceda said.
Salceda added that household consumption was “even faster that government final consumption expenditures, at around 6.3%.”
Salceda also cited that consumption growth was also partly driven by above-normal OFW remittances, suggesting that the government should not count on the same figure persisting.
“It was also the OFWs that boosted consumption here. Net Primary Income (NPl) from the Rest of the World increased by 81.2 percent year-on-year. And you can’t always count on that happening.”
“So, I still believe that we need a spending catch-up plan to release funds for projects faster next quarter,” Salceda said.
On May 7, Salceda recommended to the House leadership that they press for a government spending catch-up plan, given what Salceda calls “slower-than-needed releases of the General Appropriations Act.”
“To at least maintain 2022 spending levels, the NG needs to release the following expenditure levels (in PHP millions). This will require that the DBM exercise its omnibus authority to release funds more aggressively in the second quarter of the year. A front-loading plan that expands real spending by at least 7 percent in parallel with this year’s growth potential is more preferable,” Salceda wroyte in an aide memoire to the House Speaker.
Salceda also flagged that based on the National Government’s Cash Operations Report, “total National Government (NG) expenditures for Q1 are down by 1.06 percent from 1.10 trillion in 2022, to 1.089 trillion in 2023. This is despite headline year-on-year inflation ending at 7.6 percent during the same quarter.”
“Given inflation, to maintain the same level of real expenditures from 2022 to 2023, total Q1 spending should have been at least 1.19 trillion in 2023. This indicates that in real terms, Q1 GDP spending is actually down by 8.55 percent.”
“We have to get ahead of the curve here, as we were in 2008, when we anticipated the Global Financial Crisis by frontloading the 2008 budget.”
“Front-loading of government programs and projects was a policy of the Arroyo administration at the start of FY 2008, to respond to global financial pressures. As a result of such fiscal fortifications, the country’s GDP grew by 4.8 percent in 2008, and 1.4 percent in 2009, despite global growth slowing to 2.1 percent in 2008, and negative 1.3 percent in 2009,” Salceda wrote.
“The earlier you release funds for government projects, the more benefits you reap from them during the year.”