The national government is targeting double-digit growth in public spending next year to hit its gross domestic product (GDP) growth range target of 6.6 percent to 7.6 percent.
This outlook is included in a national budget memorandum released by the Department of Budget of Management (DBM), which act as a framework for the preparation of the fiscal year (FY) 2017 agency budget proposals.
“The FY 2017 Budget is a transition budget which aims to bridge the goals and policies of the Aquino government with those of the next administration,” the DBM said.
It added that with the institutionalization of reforms, the 2017 budget would hopefully guide the new Administration in the allocation and management of public funds based on the principles of fiscal discipline, allocative and operational efficiencies, transparency, and empowerment.
Among the salient points in the memorandum is the public spending target of the national government.
Government disbursements for 2017 are targeted to expand by 12.6 percent to P3.371 trillion, from P2.995 trillion this year.
This is equivalent to a disbursement-to-GDP ratio of 20.5 percent, according to the framework.
“Government spending will aim to accelerate domestic growth amidst the global economic slowdown by increasingly allocating funds to vital growth-inducing economic and social development programs,” the agency said.
“This proposed disbursement program will support the 6.6 percent to 7.6 percent growth target for 2017,” it added.
In 2016, it is expected that election-related and infrastructure spending would boost overall economic growth, with the first quarter that just ended already showing signs that it did, according to the latest gross domestic product (GDP) data released by the National Economic and Development Authority (NEDA) on Tuesday.
Socioeconomic Planning Secretary Emmanuel Esguerra had cited a previous study that showed there is 1-percentage point or 0.5-percentage point increase in GDP during an election year.
“It is a given. 2016 is an election year. Whether you like it or not, there is an additional boost on spending,” Esguerra, who is also NEDA director general, told reporters on Tuesday.
Govt prefers local borrowing
Meanwhile, DBM also mentioned that the government will continue to favor borrowings from domestic sources, but would moderate the domestic-to-foreign borrowing mix of 84:16 in 2016 to 80:20 from 2017 to 2019.
The agency pointed out that this borrowing mix would support domestic liquidity for cheaper and more efficient future fund raising efforts, while at the same time minimizing the country’s exposure to exchange rate volatility.
“Access to external financing will still be maintained, however, to allow greater borrowing flexibility,” it stated.
The DBM stressed that the financing program is expected to further trim down the debt-to-GDP ratio from 44.8 percent in 2015 to around 35.5 percent in 2019.
The agency added that the P3.371 trillion 2017 disbursement program will translate to an obligation budget ceiling of P3.350 trillion, P348.2 billion or 11.6 percent more than the 2016 budget level of P3.001 trillion.