‘Budget deficit stands at P18.8 billion’ - Mid Term Review paper
by Jerry Bungu
The cumulative budget deficit stands at about P18.8 billion for the first half of NDP 10, inclusive of the current financial year, government’s key policy paper on NDP10 midterm has revealed.
This is the more reason why government has to focus more on a high growth strategy that emphasizes spending that is both cost-effective, national priorities, scale down spending on low return activities or programmes and return to modest surpluses in the second half of NDP 10.
“This is in light of the fact that the average real economic growth rate for the first 3 years of NDP 10 has been 2.7 percent which is below the 3.1 percent expected growth during the preparation of NDP 10.This means that the economy would have to grow by much greater growth rates in the remaining years of NDP 10 in order to realize the GDP growth of trebling per capita income by 2016,” the paper observed.
However, there is need to understand the source of growth during the first half of NDP 10 relative to the situation at the inception of the plan. Over this time horizon, there was an overall real GDP growth of 6.54 percent per annum.
The question which now needs to be addressed is how far off are we from this desired growth rate. This question has to be addressed in light of the Vision 2016 goal of trebling the real per capita income by the end of NDP 10, which also marks the end of Vision 2016.
Statistics indicate that growth in the mining sector declined by 4.7 percent per annum on average between the period 2006 and 2011. The non-mining sectors on the other hand grew significantly by 7.6 percent per annum over the same period.
There was noticeable growth in some of the non-mining sectors contributing towards such growth, which included those in finance and businesses, trade, hotels and restaurant and construction. The general government grew modestly by 4.2 percent per annum.
“Of significant importance is that total GDP grew on average by only 2.34 percent per annum. More generally, issues of whether to consider non-mineral GDP and exclude mineral GDP in planning for government expenditure is subject to debate. This is in light of the fact that there are signs of declining per capita earnings from diamonds and slow growth of non-mining exports of goods,” the paper noted.
Though non-diamond exports have tripled since 2000/01 they slumped by the end of the decade. This largely reflects the poor performance of beef and textiles and the relative failure of other goods and services to take off as effectively as required. Moreover, even though the economy has grown steadily over the last decade, non-diamond exports have fallen as a share of non-mining GDP.