Small projects key to sustaining state spending hike, prodding growth

THE GOVERNMENT may resort to "quick fixes" to continue a spending hike seen since 2015's second half that, in turn, should anchor growth of an economy increasingly bereft of the boost from election-related consumption, economists said in separate recent interviews.

Budget Secretary Benjamin E. Diokno has said he expects growth to have hit 7% in the second quarter, and then to taper off this semester as the added boost from election-related spending fades and as base effects kick in.

"It will be much faster than [the first quarter's] 6.9%, around 7%," Mr. Diokno had said on the sidelines of a Rotary Club of Manila meeting last week when asked for a second-quarter growth estimate.

"But the second half will be slower. Overall, the annual (economic growth rate will be) around 6%."

Mr. Diokno's estimate matches the low end of the government's downward-revised 6-7% full-year target. If realized, this would be steady from 2015's 5.9% finish and still allow the Philippines to remain among Southeast Asia's faster-growing economies.

Public spending rose by 11% from a year ago in the second quarter to hit P629.805 billion, while revenues stood steady at P621.977 billion, according to Treasury data.

The Philippine Statistics Authority is scheduled to report official second-quarter growth data on Aug. 18 in Davao City.

Socioeconomic Planning Sec. Ernesto M. Pernia has said economic managers preferred to be "conservative" with a scaled-down growth forecast, saying that the new government officials would still need time to adjust to their posts which could temporarily slow activity.

Ildemarc C. Bautista, assistant vice-president and head of research at Metropolitan Bank & Trust Co., said he expects growth to clock in at 6.3% this year, adding that this could still be exceeded, depending on the government's ability to kick-start its programs.

"[H]istorically, government spending normalizes afterwards and base effects kick in, leading to slower growth relative to the second quarter clip," Mr. Bautista said in a recent e-mail.

"At any rate, we expect GDP growth to average 6.3% this year, with some upward bias depending on the ability of the new administration to push its deficit-spending programs," he added, saying: This remains to be seen this year in the absence of immediate 'shovel-ready' projects they can push, plus they are still in transition mode right now.

"However, the government target of 6-7% GDP growth is widely expected to be readily hit at any rate."

But while the Duterte administration is still learning the ropes, agencies can already spend on smaller items while they gear up for the rollout of major projects and programs, another economist said.


"Low-hanging fruit would be small practical fixes in small ticket items but at the same time roll out larger projects, so that there would several improvements in the pipeline. Quick fixes that would ease the burden of the Filipinos greatly could be something as simple as additional benches in airports," Nicholas Antonio T. Mapa, research officer at the Bank of the Philippine Islands, said separately.

"Spending to declog existing drainage facilities ahead of the onset of La NiAa will go a long way to addressing the floods we will be having in the coming months before they can get a more comprehensive anti-flooding system."

Mr. Mapa added that authorities can pursue equipment upgrades, in line with President Rodrigo R. Duterte's call to streamline frontline services and cut waiting time for securing government documents.

The Budget department is currently finalizing its P3.35-trillion proposed national spending plan for 2017, which will reflect the priorities of the Duterte administration and how it plans to push them through specific projects.

Mr. Diokno said the Executive plans to submit the proposed 2017 national budget to Congress by Aug. 15, adding that it will be a fresh test of the absorptive capacity of government agencies.

The 2017 budget will be 11.6% more than this year's actual P3.002-trillion allocation, and will involve some P890.9 billion for infrastructure or about 5.2% of gross domestic product.

The new budget must be passed by both the House of Representatives and Senate and forwarded to MalacaAang for signing into law by yearend.

Source: Business World Online