Jun. 22--From an original program of P1.495 trillion, the country's economic managers, however, cut the government's expenditures to P1.489 trillion in line with a reduction in their growth target to between 0.8 percent and 1.8 percent from the earlier 3.1 percent to 4.1 percent. This was their third reduction in the country's gross domestic product (GDP) growth target.

An indicator of economic performance, GDP measures the amount of goods and services produced in a country.

Of the total spending program, capital outlays would amount to P289.3 billion this year from P273.2 billion last year.

"We are investing more in infrastructure to stimulate growth," Dennis Arroyo, NEDA director for the Planning and Policy Staff, said.

He said the delay in the passage of this year's budget led to the failure of the Economic Resiliency Plan (ERP) to kick in during the first quarter. This in turn caused the sharp slowdown in economic growth to 0.4 percent for the first three months of the year from 3.9 percent last year.

Arroyo, however, said the ERP spending would kick in during the second and third quarters.

In a document, Finance Secretary Margarito Teves said the government cannot afford to compress spending as this would only cut growth.

"Our capability to spend is critical to economic recovery--more than taxes," he said.

The Finance secretary said P20 billion in additional spending can boost the country's income by P64.4 billion. This means that for every peso in additional spending, "we increase our income by P3," he said.

"The same amount of tax cuts can boost income by only P35.9 billion or for every peso in tax cuts, we only boost income by P1.50," he added.

In view of the first-quarter economic data and global developments, the government raised the budget deficit target to P250 billion, or 3.2 percent of GDP from an earlier program of P199.2 billion, or 2.5 percent of GDP.

"The increase in the deficit ceiling will allow us to continue our level of spending to keep our economy growing despite the adverse impact of recent developments on our revenue collection," Teves said.

In this regard, the executive department wants Congress to pass pending priority legislative measures aimed at plugging loopholes in the tax system, as well as suspend proceedings on bills that would only erode the country's revenue collection effort, he said.

Teves said the Finance department is bucking the passage of several bills giving tax breaks that would cut revenues by P51 billion.

These measures include the creation of five economic zones (Bataan, Ilocos Sur, Davao Oriental, Cebu and Samal), which would cost the government P15 billion; reduced national government share from Malampaya, P14.9 billion; re-imposition of franchise tax on power distribution, P7.1 billon; income and documentary stamp tax (DST) exemptions on real estate investment trust, P5.3 billion; exemption of hybrid vehicles from excise tax and value-added tax (VAT), P2.7 billion; abolition of premium tax on life insurance policies,P1.8 billion; abolition of DST on secondary trading of stocks, P1.4 billion; abolition of DST on overseas Filipino workers remittances, P1 billion; tax exemption of Pag-Ibig Fund, P1 billion; and the abolition of DST on life insurance policies, P800,000.

"Further downward adjustments in macroeconomic indicators plus these P51 billion negative measures will have significant impact on macroeconomic stability," Teves said.

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