Gov’t to drive growth through infra spending

CEBU, Philippines - The Department of Budget and Management has noted public spending will drive up this year by fast tracking infrastructure projects in hope to spur further economic growth.

"Last year's underspending issue will be addressed by the increase in our infrastructure investments, which is equivalent to four percent of our projected GDP for this year," Budget Secretary Florencio Abad said in a statement posted on DBM's website. The government has targeted an infrastructure spending level of 5 percent by 2016.

The public works department has the second biggest budget share of P303.2 billion this year. Its budget went up by 37.9 percent from P219.9 billion last year. P185.8 billion of the budget will be spent to finish all national roads by 2016 and all bridges along public roads by 2015.

State spending

In a research note on the Philippine economy, Economist Luz Lorenzo of Maybank ATR Kim Eng said improved public spending on consumption and investment started to be felt in the last quarter last year, although it was still weak.

Public construction expenditures, after two successive quarters of contraction, grew 5.1 percent in Q4.

Lorenzo noted this points further growth this year with the national budget giving a 15 percent rise in expenditures, bolstered further by the supplemental 2014 budget of P22 billion "aimed mostly at typhoon-ravaged areas".

"Thus we expect a major contribution in growth to come from government spending," the economist noted. “This is in stark contrast from last year when public consumption growth dwindled to 1.8 percent from 7.7 percent in 2013…”

Last year, public infrastructure expenditures fell 1.5 percent from 14.9 percent growth in 2013 following the fund disbursement issues.

"Because public spending usually has a strong multiplier impact, we expect the rest of the economy to feel the benefits. Note that private construction growth has been resilient even with the contraction in government construction spending," Lorenzo's economics research further said.

Growth forecast

Maybank forecasts Philippine total economic output to rise 7 percent this year. While government economic planners expect a 7 to 8 percent GDP growth this year.

Government's ability to spend its P2.6 trillion national budget will largely impact the nation's growth this year. About 78 percent of the budget was released at the start of the year to solve project delays and speed up fund release.

In an earlier interview, Dionisio Ledres, economic development specialist at the National Economic and Development Authority-7, urged government departments to fast track project execution to create jobs and help the economy grow.

Ledres pointed out poor budget execution of project implementing agencies has contributed to the low state spending, pulling down economic growth. 

NEDA-7 Director Efren Carreon also stressed the bigger budget shares of various agencies should be matched up with enhanced spending capacity without necessarily defying government rules and regulations. (FREEMAN)