PHL to assess effects of US rating downgrade on 2012 budget

The Philippine government will be assessing the possible effects of the United States' lower credit rating on the country's proposed P1.8-trillion national budget for 2012, Sen. Franklin Drilon said Monday. Drilon, chairman of the Senate finance committee, said the Development Budget Coordinating Committee (DBCC) will meet again in two months to make a "better assessment" of the impact of the downgrading of the US credit rating on the Philippines. "This 2012 budget will be the most challenging because of the downgrading over the weekend of the credit rating of the biggest economy — the United States. They say that from the time the developed economies like US and China cough, it would take us six months to get a cold," he told reporters after the DBCC briefed the Senate finance committee on the proposed 2012 budget. He explained that the US' downgraded credit rating might change the Philippines' budget assumption because the 2012 budget was crafted without considering this development. He specifically said the downgrade might change the Philippines' projection for its gross domestic product (GDP) growth, which is critical in the unemployment and underemployment rates of the country. "This has never happened since 1917 and therefore we must be very careful about the assessment our economic managers are going to make on this," he said. Drilon likewise said that they are concerned about the current underspending of the country under the 2011 budget. "The DBCC is aware of this and they're exerting extra effort in order that there can be more spending, there can be more public infrastructure spending, public consumption in the budget. This is really something that must be looked at carefully," he said. The proposed budget for 2012 is P171 billion (10.4 percent) more than the P1.645 trillion for 2011. It accounts for 16.5 percent of the projected GDP. It was based on a growth assumption of 5.5 percent, although the administration continues to vie for a 7 percent to 8 percent growth. Drilon said they hope to pass the 2012 budget by December. - KBK, GMA News