Purisima says spending cut won’t affect growth
CUTS in government spending next year would not affect the country’s growth trajectory, Finance Secretary Cesar Purisima said.
Purisima said the spending cut would be off-set by the South East Asian-wide growth in tourism, investments and business-process-outsourcing (BPO) industry in 2011.
The finance chief, who is now touring the US to drum up interest for the government’s Public-Private Partnerships (PPPs) initiative, said the $160-billion South East Asian economy is already seen to grow 6 percent this year, which could spill over to 2011.
He added the country’s strong economic performance has likewise prompted global credit rating agencies to revisit its rating and may give an upgrade.
The economy grew to a strong 7.3 percent during the first quarter and is seen by economists to grow again by atleast 7 percent in the second quarter.
Purisima said the country could snatch a credit- rating upgrade as economic growth accelerates and the budget deficit narrows.
“The outlook is quite favorable,” Purisima said in a Bloomberg Television interview in New York that was aired Wednesday.
The government is trying to increase its revenue as a percentage of gross domestic product to make its fiscal deficit more manageable and “if we attain this, then I think a rating upgrade is very likely,” he said.
As of early this week, Fitch Ratings has given the Philippines a BB credit rating, which is two levels below investment grade.
The government has slashed its proposed budget for next year, targeting spending for the hiring of police, doctors and teachers, construction of new office buildings and even the purchase of new government vehicles.
The budget department cut the proposed 2011 outlay to P1.645-trillion, or 112 billion lower than the initial proposal of P1.757 trillion.
Budget Secretary Butch Abad said on Tuesday that President Benigno Aquino III approved the recommendation for a P1.645-trillion obligation budget.
The amount was pegged on a “conservative” 5-percent gross domestic product (GDP) growth even though the government is targeting a GDP growth of 7 to 8 percent for 2011.
Among the expenditures also affected are the magna carta benefits and allowances of officials of government-owned-and-controlled-corporations (GOCCs).
Abad, who held the education portfolio during first part of the Arroyo government, said the budget for the Department of Education (DepEd) will be over P200 billion.
For the year 2010, the budget for education — including allocations for the DepEd, state colleges and universities and Commission on Higher Education — was P185.477 billion.
Abad said investments in conditional cash transfers will grow from P10 billion to P21 billion next year, which would enable to government to cover about 2.3 million households — 1.3 billion more than the 1 million target households for 2010. Dino Ng