P4.1-trillion 2020 national budget set - EcoFinBiz Blog

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P4.1-trillion 2020 national budget set

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TROUBLES with this year’s national spending plan notwithstanding, the Budget department has earmarked cash-based 2020 appropriations that are nearly a tenth bigger year-on-year as the government pushes infrastructure development and social services, according to an April 12 National Budget Memorandum.

The memorandum pegged the proposed 2020 cash-based national budget — which takes into consideration specific state offices’ spending capacities within a fiscal year — at P4.1 trillion, equivalent to 19.4% of gross domestic product (GDP) and 9.1% more than this year’s P3.757-trillion spending plan that now awaits signature into law by President Rodrigo R. Duterte.

“The cash budgeting system will continue to be implemented in 2020. This will limit agencies incurring obligations and disbursing payments to goods delivered and services rendered, inspected and accepted within the fiscal year,” the memorandum explained.

Disbursements planned for 2020 total some P4.21 trillion, 19.9% of GDP and 11.6% more than this year’s planned P3.774 trillion, while revenues will increase by 13.4% to P3.573 trillion, 16.9% of GDP, from P3.15 trillion.

That will yield a P637.6-trillion fiscal deficit equivalent to three percent of GDP that will be 2.1% bigger than the P624.4-trillion gap programmed for this year, equivalent to 3.2% of GDP.

“The Duterte administration will prioritize the acceleration of infrastructure, anti-poverty and pro-employment spending through strategic infrastructure projects, and by supporting the implementation of recent game-changing laws such as rice liberalization, universal health care, and Bangsamoro autonomy,” the memorandum read.

“The shift to cash budgeting starting 2019, along with cash management reforms, will ensure better planning, swift program delivery, and strengthen fiscal discipline, as well as accountability mechanisms between appropriated budgets and program outputs.”

The same document showed planned appropriations of P4.786 trillion for 2021 (20.5% of GDP and 16.7% more than the 2020 plan) and P5.295 trillion for 2022 (20.6% of GDP and 10.6% more than the 2021 appropriations).

Last year saw both revenues and disbursements grow by double-digit rates year-on-year and exceed their respective programs. Revenues and disbursements increased by 15.2% to P2.85 trillion and by 20.7% to P3.408 trillion, respectively, exceeding their programs by 0.1% and by 1.1% respectively “due to higher tax collections following the TRAIN law and non-tax revenues, and heavy public spending in infrastructures and social services,” according to the memorandum, referring to Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act that slashed personal income tax rates but raised or added levies on a host of items.

The resulting fiscal balance yielded a P558.3-billion deficit equivalent to 3.2% of GDP.

The shift to a cash-based budgeting system starting this year led to a tiff between Mr. Duterte’s economic managers, with the Budget department as point man in this issue, and the House of Representatives, as it pared down the national budget for 2019 — an election year — to even lower than 2018’s P3.767-trillion spending plan.

That row then gave way to a legislative impasse — as the House and the Senate accused each other of irregular fund realignments — that led to a re-enacted national budget as Congress failed to approve the new appropriations by end-2018.

Just last week, a visibly exasperated Mr. Duterte threatened to just veto the entire 2019 spending plan if a Palace review were to find irregular realignments.

Due to the delay, the interagency Development Budget Coordination Committee on March 13 slashed its growth forecast for 2019 GDP growth to 6-7% from 7-8% and to 6.5-7.5% from 7-8% for next year, while the National Economic and Development Authority projected separately that the full-year GDP growth will decline to 6.1-6.3% if the reenacted 2018 budget remains in force until April; and down to 4.2-4.9%, if reenacted for the whole year.

The delay in budget enactment — which leaves new projects unfunded and prevented the government from spending ahead of the 45-day public works ban before the May 13 mid-term elections and the rains next semester — has also prompted the Asian Development Bank, the International Monetary Fund, the World Bank, economic agencies of the United Nations and S&P Global Ratings to cut their economic growth projections for the Philippines for this year.

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