Domestic spending seen as key to surviving trade war fallout

THE Philippines is starting to feel the impact of the US-China trade war but can manage the turbulence by increasing domestic spending, Finance Secretary Carlos G. Dominguez III said.

Speaking to reporters on the sidelines of The Asset Philippine Forum in Taguig, Mr. Dominguez said demand for Philippine products is falling due to the trade dispute between Washington and Beijing.

“It’s unfortunate that the trade war is creating a drop in demand for our products… People are cautious about making investments because they don’t know where they’re going. Our biggest strategy is to accelerate our domestic spending but (maintaining a) reasonable deficit,” he said.

When asked about the pace of government spending this year, he said the first six months’ performance has been “lousy,” due to the delay in the 2019 budget, which dampened disbursements, as did the spending ban that came with the midterm elections.

“But as I said, we are not driving a Ferrari. When we step on the gas, it doesn’t go from 0-60 in three seconds. It takes a bit of time for bureaucracy to get going, but it’s on the right track,” he said, adding that National Treasurer has informed him that government spending picked up in recent months.

National Treasurer Rosalia V. De Leon also told reporters yesterday of the improvements in government spending in recent months.

“It’s really been picking up in the past two months. So even for October, first week we’ve seen very high disbursements, so if this trend continues, then we see… the deficit levels (heading in the direction of) 3.2%” as a proportion of gross domestic product (GDP), Ms. De Leon said, adding that the Treasury has seen “double-digit growth” in spending in September and early October.

According to the Treasury, expenditure rose 8.78% year-on-year to P282.2 billion in August, after a 13.61% climb in primary expenditure, which excludes interest payments.

In his keynote speech at the forum, Mr. Dominguez said that the government’s three-pronged strategy focuses on “prudent fiscal and stable monetary policy” to bolster growth, while raising spending on infrastructure modernization and human capital development, and implementing the remaining packages of the Comprehensive Tax Reform Program (CTRP).

Mr. Dominguez said that the Philippines has obtained some investment deals as a result of President Rodrigo R. Duterte’s visit to Russia, although he provided no details.

“We don’t know exactly how much the investment deals are but they’re quite significant. And you have to remember that we don’t really have a big relationship with Russia and I think the trip of the President opened up avenues for increased contact with the Russians like tourism investment. They’re very interested to look at our infrastructure projects, particularly in power,” Mr. Dominguez said. — Luz Wendy T. Noble