ON Thursday the Department of Finance released the monthly national budget balance data for August, posting a surplus of P15 billion and deficits in June and July of P72.7 billion and P32.2 billion, respectively. What that means in practical terms is that the Aquino Administration hasn’t yet figured out what it’s supposed to do with all those pieces of paper with people’s pictures on them.
Ordinarily the words “surplus” and “deficit” have clear positive and negative connotations. In his statement on the August figures, Finance Secretary Cesar Purisima tried to make the most of that in explaining away another weak performance indicator as some kind of achievement, asserting that the latest fiscal strengthened the economy’s reputation “as one of Asia’s safest and strongest.”
The Philippines, however, is anything but ordinary, having an economy that weirdly seems to grow and atrophy at the same time. For the better part of five years the repeated advice of practically everyone has been that government spending should be increased if Aquino and his band of merry men are at all sincere in at least attempting to create the “reforms” and the “sustained growth” they’re all fond of talking about. Government spending won’t by itself make or break the economy, but it is a significant part of it, and has a considerable indirect effect on the rest.
The present government’s reluctance to spend judiciously has proven to be a drag on the economy, preventing the country from moving up from the “doing pretty well, considering” bracket to having the kind of breakout growth countries like Malaysia or Thailand have already experienced. Despite their behavior, not everyone in the Administration is a complete doofus, which is why the budget deficit goal for the year is set at P283.7 billion; realizing that spending needs to catch up, the government’s financial brains have figured out that is the amount that can be safely tapped from the country’s enormous and otherwise unproductive reserves in addition to the normal annual revenues to help stimulate the economy.
That is evidently easier said than done; August’s result indicates that the government took in P15 billion more than it spent. About half of what the government does spend, however, goes to debt service; if that amount is excluded, the shortfall in government spending in August was P31.5 billion.
Even that figure does not accurately reflect how much the government is not spending, because in addition to revenues from taxes, tariffs, and various other sources during the month, the government also takes on new debt in the form of securities; while those do turn into expenditures later on, in the current month they are for all intents and purposes additional receipts. Government debt data lags a month behind the summary budget data, so to illustrate the point we have to go back to July. The comparable primary budget surplus in July was P10.6 billion lower than in August at P20.9 billion; at the same time, the government issued P31 billion in new debt, so in effect July’s underspending actually totaled about P41.6 billion. If the same rough pattern holds for August, underspending was probably in the neighborhood of P65 billion; we’ll be able to determine that one way or the other next month.
The need for increased government spending is obvious, yet even before they got caught trying to pickpocket the budget through the illegal Disbursement Acceleration Program, the Aquino Administration kept a corpse-like grip on spending. Despite repeatedly congratulating themselves for creating a “better fiscal position” for the country, the government’s lack of an overall vision (“tuwid na daan” is not a plan) and the competence to carry it out has left the Philippines more vulnerable; every economic indicator has trended downward for the past several months, and most of it can be attributed to negative external factors because the economy is now too inflexible to adapt.
Realistically, there’s probably no time to do anything to reverse the slide until after next May’s election; with the normal pre-election moratorium on new projects looming in the near future, any increase in government spending will go to consumption, which has far less of an impact on GDP and the economy as a whole than capital development. While increased consumer spending is expected to take up the slack, particularly in the Christmas season, what impact on that the stubborn and misguided refusal of Aquino and his ‘anointed’ successor Mar Roxas to so much as consider income tax reform—another example of the current regime’s complete lack of awareness—remains to be seen.