MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) urged the Aquino administration to spend more to boost the country’s economic performance amid the uncertainties in the US and the debt crisis in Europe.
In a forum hosted by the Tuesday Club at EDSA Shangri-La, BSP Governor Amando M. Tetangco Jr. said the underspending by the government has pulled down economic growth to 3.6 percent in the first three quarters of last year.
“The National Government has room to spend. Weak government spending has been credited as a factor for the recent growth numbers,” Tetangco stressed.
The country’s gross domestic product (GDP) expanded by only 3.2 percent in the third quarter of last year from 7.3 percent in the same period in 2010.
The Cabinet-level Development Budget Coordination Committee (DBCC) lowered the GDP growth target to a range of 4.5 percent to 5.5 percent instead of the revised five percent to six percent last year due to weak global trade and government underspending.
The government has committed to trim the budget deficit to P300 billion or three percent of GDP last year from a record level of P314.4 billion or 3.7 percent of GDP in 2010.
Due to underspending, the government managed to trim the deficit by 64 percent to P96.25 billion in the first 11 months of last year from P267.328 billion in the same period in 2010.
The government’s revenue collections inched up by 13.13 percent during the 11-period to P1.25 trillion while actual expenditures fell two percent to P1.35 trillion.
For November alone, the Aquino administration incurred a budget deficit of P22 billion due to the higher spending as the administration launched a P72 billion stimulus package.
“The national government is reported to have accelerated expenditures,” Tetangco said.
The BSP chief explained that the government needs to be mindful that spending should be targeted at sectors that would lead to greater employment generation and on infrastructure projects.
“Together with an appropriate monetary policy stance, targeted government spending and the participation of the private sector could ensure that all the engines of growth are firing up,” Tetangco said.
The Aquino administration has committed to trim the deficit to two percent of GDP starting 2013 until 2016.
Earlier, multilateral lender International Monetary Fund (IMF) urged the Aquino administration to spend more, attract higher investments, and widen its tax revenue base to survive the turbulence in regional financial markets over the last two months brought about by fragile economic growth in the US and the debt crisis in Europe.
IMF assistant director Vivec Arora earlier said the Philippines needs to raise its spending level, attract more private investors and strengthen its social safety nets.
Arora pointed out that the Aquino administration’s PPP scheme would address the need for higher infrastructure spending.
He cited the need for the Philippines to broaden its tax base and strengthen tax administration by overhauling its excise tax system on sin products and rationalizing its fiscal incentives to raise much needed revenue to bankroll social and infrastructure spending. - By Lawrence Agcaoili
