By Chloe Mari A. Hufana and Katherine K. Chan, Reporters
PRESIDENT Ferdinand R. Marcos, Jr. on Wednesday said the government is considering a supplemental budget and legislative amendments to cushion the impact of the Iran war.
The government needs to move quickly to respond to the energy emergency triggered by the US-Israel war on Iran, including measures that might require congressional action, Mr. Marcos told reporters in Manila.
Mr. Marcos said the Executive is studying the possibility of proposing a supplemental budget and amendments to existing laws to support sectors affected by rising fuel prices.
“We were thinking that maybe we could have a supplemental budget,” the President said, without specifying an amount.
“This is necessary so that we can assist the people because of the oil crisis,” he added, citing discussions in a committee tasked with crafting measures to ease the effects of the Iran war.
A supplemental budget is an additional spending plan approved through legislation to address unforeseen needs or fund programs not covered by the national budget.
In March, the President placed the country under a year-long energy emergency following volatility in global oil markets linked to the war in the Middle East.
The Department of Economy, Planning, and Development in April estimated that the National Government may need P429 billion to fund its ongoing response measures should the Iran war stretch until December.
On Wednesday, Mr. Marcos also questioned why the Legislature had effectively halted work while the Executive and Judiciary continued normal operations during the crisis.
He said the government needs to provide stability and assurance to Filipinos as global uncertainties threaten fuel prices and economic activity.
Mr. Marcos said the Executive is now looking at the law and Constitution to see how they “can remedy the situation.”
“But it requires the cooperation and the commitment of the Senate leadership to continue with their work… And they haven’t been doing much of a good job right now,” he added.
The Senate had not convened since Monday and only briefly resumed session on Wednesday. With 12 senators present, it elected Senator Sherwin T. Gatchalian as Senate president pro tempore before adjourning sine die.
Congress will convene its second regular session on July 27.
Zy-za Nadine N. Suzara, a public finance specialist of the People’s Budget Coalition, said a supplemental budget could help cushion the impact of the energy crisis, but the government must first identify and disclose credible funding sources, whether from additional revenues or other financing options.
Any spending package should be carefully targeted and designed in consultation with affected sectors to ensure limited resources deliver the greatest impact, she said in a Viber message.
Ms. Suzara said delays in congressional approval would undermine the timeliness and effectiveness of the measures, arguing that preparations should have begun months earlier as ordinary Filipinos were affected by the crisis.
BIGGER DEFICIT
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the supplemental budget would further widen the budget deficit and require more National Government borrowings.
Latest Treasury data showed the country’s budget gap stood at P324.1 billion as of April, 14.44% narrower than the P378.7-billion deficit posted in the same period last year. This represented 20.1% of the P1.61-trillion deficit ceiling for this year.
Meanwhile, Oxford Economics said emerging economies in Southeast Asia could see their budget deficits widen this year as the fiscal cost of the Middle East war bites, with the Philippines projected as the laggard among its peers.
In a report published late on Tuesday, Oxford Economics assistant economist Artie Lam said the fiscal deficits of emerging markets in the Association of Southeast Asian Nations (ASEAN), or Indonesia, Malaysia, the Philippines, Thailand, and Vietnam, could widen by as much as 1.5 percentage points (ppts) this year.
“We project fiscal deficits to widen by up to 1.5 ppts in emerging market ASEAN this year because of higher government spending on fuel subsidies and lower revenues stemming from weaker economic activity,” Mr. Lam said. “Higher yields in the region have also constrained fiscal space, especially in Indonesia and the Philippines.”
According to the United Kingdom-based think tank, the Philippines had the largest fiscal deficit within emerging ASEAN last year.
Mr. Lam said this will force the Philippines, as well as Indonesia, to face the most market pressure to limit its spending.
The National Government may continue to feel the fiscal pressure over the medium term as Oxford Economics said the Philippines will likely have the largest fiscal deficit-to-gross domestic product share until 2029, followed by Malaysia, Thailand, Indonesia and Vietnam.
Mr. Lam warned that higher borrowing costs will likely dampen government spending and public investments, further widening the country’s budget deficit.
“A marked increase in borrowing costs would limit its ability to respond, and persistently high yields may even force the government to rein in future spending, weighing on government consumption and public investment,” he said.
Mr. Lam expects interest rates to rise further this year as heated inflation prompts the Bangko Sentral ng Pilipinas (BSP) to tighten monetary policy.
He said the BSP may deliver 75 basis points (bps) more in rate hikes until yearend.
“We also expect the Philippines to be the most affected by inflation in the region, likely triggering a total of 100 bps in policy rate hikes this year by a historically inflation-focused central bank, 25 bps of which have already been delivered,” he said.
In April, the central bank raised the key policy rate by 25 bps to 4.5%, marking its first tightening move since October 2023, as it sought to temper second-round price effects and keep inflation expectations anchored.
The BSP has said that they stand ready to implement all necessary monetary policy actions to bring inflation back to their 2%-4% target, as they expect it to average 6.3% this year and 4.3% in 2027.
Still, Oxford Economics’ Mr. Lam noted that they are not yet concerned about emerging ASEAN’s current fiscal deficits as they are banking on the potential relief from the countries’ fiscal consolidation once the conflict ends.
“In the medium term, the current fiscal deficits aren’t a major reason for concern as we expect fiscal consolidation to resume after the conflict, bringing us back to the pre-war trajectory by 2028, but abrupt market movements may prompt governments to change course more rapidly than expected,” he said.
