Palace insists: Federal shift has no adverse affect on economy

Published July 18, 2018, 2:10 PM

by AJ Siytangco

By Argyll Cyrus Geducos

Malacañang said that despite the concerns of President Duterte’s economic managers, the proposed shift to a federal government will not have a negative effect to the economy.

Presidential Spokesperson Harry Roque made the statement after National Economic and Development Authority (NEDA) Director-General and Secretary Ernesto Pernia said that the regions are not yet ready for this system.

Presidential Spokesperson Harry Roque (MANILA BULLETIN)
Presidential Spokesperson Harry Roque

In a statement, Roque said that they have already clarified the matter with Pernia.

“The shift to federalism, we reiterate, would have no adverse effect on the Philippine economy,” Roque said.

“Our budget would remain the same, as identified national projects would be devolved and transferred to the internal revenue allotment (IRA) of local government units,” he added,

Roque explained that these projects include maintenance of barangay roads and bridges, water supply services, barangay health centers and daycare centers, solid waste, and disposal system of municipalities, among others.

He said that the role of the national government would be to continue to implement Build, Build, Build projects and concentrate on policy-making.

In an interview aired over One News, Pernia warned of the ill effects of shifting to federalism on the economy.

“Expenditure will be immense if we go to federalism, and we estimate that the fiscal deficit to the GDP (gross domestic product) ratio can easily jump to maybe six percent or more, and that’s really going to wreak havoc in terms of our fiscal situation,” Pernia said.

He said that the government cannot just rush to shifting to federalism and said that they would first have to “do our homework” in terms of preparing well for the country.

Earlier, economists also expressed that federalism may lead to hyperinflation. Hyperinflation refers to the very high and typically acceleration inflation and also quickly erodes the real value of the currency as prices of most or all values increase.

President Duterte is set to endorse the draft federal constitution to the Congress on his third State of the Nation Address (SONA) on Monday.