Meeting 2014 growth goal hinges on govt spending in H2

Categories: Business Updates

Date Posted: 04 Aug 2014

The government has to spend aggressively in the second half to enable the now $270-billion economy to pick up speed as targeted this year, economists said.

Bank of the Philippine Islands (BPI) lead economist Emilio S. Neri Jr. said the potential growth trajectory, estimated to accelerate as high as 7.5 percent in terms of the gross domestic product (GDP), will depend on how the disbursement of public funds picks up in the coming months given the legal problems generated by the Disbursement Acceleration Program (DAP), essentially a fiscal stimulus program.

Neri said should the government persist on its lackluster spending program in the second half, local output growth could suffer fall lower than even 6 percent in the third quarter.

The country’s first-quarter performance came lower than market expectations at only 5.7 percent. Only recently, the International Monetary Fund (IMF) said it anticipates a weak second-quarter GDP report given the low level of spending during the quarter.

The government started the second quarter with an P80.9-billion budget surplus, followed by another P11.8 billion surplus in May. The government ended the quarter with a P62.5-billion surplus. Economists consider this event odd in that accelerated public-sector spending was planned for the period precisely to help stimulate the economy.

The Philippine Statistics Authority (PSA) is set to release the latest output- growth numbers at the end of the month.

Neri said the economy needs additional support from infrastructure spending and construction, as well as from the reconstruction and rehabilitation efforts in Yolanda-affected areas, both of which requires strong disbursement of public funds.

In a separate research note, the DBS Bank also said the Philippines needs to escalate the level of public-sector spending in the next few months for the country to meet its growth goal for the year.

The government earlier projected growth to range this year from 6.5percent to 7.5 percent or higher than the 6 percent-to- 7 percent target in 2013.

DBS Bank expects growth to moderate in the April-to-June period, but anticipates the GDP numbers to bounce back in the second half.

Neri, meanwhile, said growth should average around 6.2 percent for the year on the back of robust infrastructure spending when this picks up in thesecond half.

Singapore’s DBS likewise said the 15 percent increase in spending under the 2015 budget proposal forms part of the government’s effort to quicken the pace of economic expansion similar to last year’s sanguine performance.

Last year, the economy expanded by 7.2 percent, making the Philippines one of the fastest growing countries in the region.
Written by: Bianca Cuaresma


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