The incoming Duterte administration should improve the budget absorption of implementing agencies to reach the 3-percent budget deficit ceiling as a percentage of the economy in the near term, outgoing Budget Secretary Florencio Abad said over the weekend.
“I don’t doubt the capacity of our strong macroeconomic foundation to accommodate expansionary budget, but as I emphasize here, we should continue to make sure that our implementing agencies are able to improve on their budget execution and absorption capacities because last year we had 0.9 percent [deficit-to-GDP ratio]. The year before that is like 0.6 percent,” Abad said.
Latest data from the Treasury showed that budget deficit had fallen below the goal of 2 percent of GDP since 2013. The gap represented 1.4 percent of GDP in 2013, a ratio that fell to 0.6 percent in 2014, before reaching 0.9 percent in 2015.
Incoming Budget Secretary Benjamin Diokno said the next administration could raise the budget deficit ceiling to 3 percent of GDP from 2 percent projected this year in order to increase spending on infrastructure and other services.
Abad said despite the increasing budget deficit ceiling, implementing agencies should still improve their absorption capacity.
“Even if you expand that, but your absorption is limited then you still have to deal with agencies being able to use the funds that’s available. But I think we will come to that, as the first quarter show,” Abad said.
Incoming Finance Secretary Carlos Dominguez supported Diokno’s pronouncement about the need to raise the budget deficit ceiling.
“You know Diokno said something the other day which I agree with. He says the self-imposed 2 percent of GDP limit on your deficit can be moved up to 3 percent. I agree with that,” Dominguez said.
“One of the reasons we were elected or this president [Rodrigo Duterte] was elected is because a lot of people don’t feel that they benefited from economic growth. What does that mean? That means to say a lot of people feel neglected,” Dominguez said.
Dominguez said the Duterte administration would increase infrastructure spending in the provinces.