High government spending is expected to boost the growth of the nation’s economy for the second half of 2018. The ING Bank forecasts that the Philippines will see a 6 to 6.5% growth for the period.
“Strong government spending will likely bolster growth into second half of 2018 and offset a likely slowdown in household spending due to accelerating inflation and elevated borrowing costs,” said Nicholas Mapa, a senior economist at ING Bank in Manila.
“Our forecast for 6 percent to 6.5 percent growth in the second half will rely more heavily on the national government’s ability to pump prime to offset the projected deceleration in household consumption as the twin effects of accelerating inflation and higher borrowing costs begin to bite,” said Mapa.
Government spending on infrastructure has increased by 70.5 percent year-on-year as the administration pursues the Build, Build, Build initiative.
“This is mostly due to the road infrastructure program of the Department of Public Works and Highways (such as road widening of primary and secondary roads, construction of bypass and diversion roads, construction/repair/rehabilitation/improvement of local infrastructures, flood control and drainage improvement projects),” the Department of Budget and Management explained in a report.
Government infrastructure spending, along with other capital outlays reached P68.4 billion in August.
“We owe it to the Filipino people that implementing agencies immediately utilize the public funds that have been released to ensure the effective delivery of public services within the fiscal year. This is in accordance with annual cash-based budgeting that Congress should pass into law for future administrations to adhere to,” said Budget Secretary Benjamin Diokno. The high spending is seen as an investment in the country.
Besides infrastructure investments, the high spending is also attributed to the modernization of the Armed Forces of the Philippines and the procurement of military communication equipment.
High spending is also anticipated as the May 2019 elections draw near.
The Philippine economy, according to gross domestic product, grew by 6.3 percent in the first six months of 2018. This was below the recently revised target of 6.5-6.9 percent for 2018. Last year, the economy grew by 6.7%.
Several big-ticket projects are still slated for this year, including the implementation of the DPWH-led Educational Facilities fund.
However, despite the high spending, the government’s fiscal deficit(spending beyond revenue) remains within budget. It is now at P378.2 billion, or 72% of the budgeted deficit of P523.7 billion for 2018.