t’s back to the
drawing board for government planners. All their economic assumptions have gone
out the window as the country starts feeling the effects of the global crisis.
The new assumptions will not be made available until the middle of the month,
but Finance Secretary Margarito Teves said the directions are plain enough to
see.
Economic growth will be less than the targeted 3.7 to 4.4
percent. With a deeper economic slowdown than originally expected, revenue
collections will naturally dip, leading to a wider government deficit.
Let’s run through the previous assumptions. From a bullish
GDP growth estimate of 6.1 to 7.1 percent, the Development Budget Coordinating
Council downscaled growth expectations to 3.7 to 4.7 percent this year on the
back of a 4.6 percent GDP finish in 2008.
The upper end of 4.7 percent GDP growth was further slashed
to 4.4 percent in late February.
The state-run Philippine Institute for Development Studies (PIDS)
is forecasting a 4.3 percent GDP growth while global credit rating agencies were
less generous: 3.3 percent according to Moody’s; 2.2 percent as per Standard &
Poor’s; and, the lowest at 2 percent by Fitch Rating. The global banking giant
UBS was the stingiest with its 1.1 percent.
The original revenue goal for the BIR was P910.8 billion and
for Customs P317 billion. these have since been reduced to P865.5 billion and
P277.2 billion, respectively.
The original programmed deficit was P60 billion. This was
initially raised to P102 billion, then upped again to the current P177.2
billion.
Last month, Planning Secretary Ralph Recto already let the
cat out of the bag when he said the deficit could swell to P275 billion and, in
the worst case, to P300 billion because of likely sharp decline in revenues.
Teves initially downplayed Recto’s figures, but with his recent disclosure of a
total recasting of economic assumptions, a P275 million to P300 billion deficit
appears not improbable after all.
What all this means is that up to 21 percent of the
programmed spending of P1.4 trillion for will have to be funded by borrowings. A
household needing to borrow 21 centavos for every peso in spending is asking for
trouble down. Same with the government.
With all this talk about a total overhaul of economic
assumptions, why have we not heard a peep about lowering government spending?
Officials make it appear that the P1.4 trillion budget is graven on stone. It
isn’t.
They want to make us believe the ongoing review will result in a total
recasting of the 2009 financial program. It is nothing of the sort if it solely
focuses on revenue collections and keeps a blind eye on the spending side.
