The government’s infrastructure spending dropped by 21.8 percent to P84.9 billion in August, as project validation by the Department of Public Works and Highways (DPWH) and adverse weather conditions slowed disbursements.
Latest data from the Department of Budget and Management (DBM) showed infrastructure expenditure and other capital outlays fell to P84.9 billion in August from P108.6 billion in the same month last year.
The downturn stemmed from the ongoing validation of the status of implementation, quality and completion of infrastructure projects implemented by the DPWH nationwide, according to the DBM.
The review process has held up contractors’ submission of progress billings, as well as the timelines for the processing of payment claims and disbursement of funds.
Compounding the setback were adverse weather conditions in August, which slowed the construction of various infrastructure projects, particularly in areas or regions hit by heavy Habagat rains and typhoons.
Despite this, higher disbursements were recorded by the Department of Transportation (DOTr) for local counterpart funds for foreign-assisted projects and the Department of Education (DepEd) for the construction, rehabilitation, and repair of school buildings-helping temper the contraction in infrastructure spending.
From January to August, infrastructure and other capital outlays also declined by 5.6 percent to P798.4 billion from P845.3 billion in the same period a year ago.
‘Infrastructure spending was lower pending settlement of progress billings and completed infrastructure projects of the DPWH due to the ongoing validation and audit amid corruption issues,’ the DBM said.
The timing of releases for the Revised Armed Forces of the Philippines Modernization Program (RAFPMP) under the Department of National Defense (DND) also weighed on expenditures during the eight-month period.
Meanwhile, infrastructure disbursements, including the infrastructure components of subsidy and equity to state-run corporations and transfers to local government units, slumped by 5 percent year-on-year to P940.1 billion as of end-August from P989.4 billion.
According to John Paolo Rivera, senior research fellow at state-run think tank Philippine Institute for Development Studies, the decline in infrastructure spending may be a ‘significant risk’ to the country’s fiscal consolidation and growth trajectory.
‘Infrastructure outlays have been a key driver of both aggregate demand and productivity improvements, so a sharp slowdown signals both an immediate demand shortfall and longer-term capacity constraints,’ Rivera told BusinessMirror.
‘The national government itself has flagged this weakness as a factor that may cause it to miss the full-year growth target.’
Finance Secretary Ralph G. Recto said the government could miss its growth target of 5.5 percent to 6.5 percent this year due to slower government spending.
‘Rebound possible’
However, Rivera said a rebound in spending is possible if implementation issues, such as project validation and quality checks, are resolved quickly, fund disbursement is accelerated and the weather cooperates.
‘If not, the government must compensate via stronger fiscal stimulus in other areas, prioritize high-multipliers projects, avoid further delays and ensure efficient spending to make up the gap,’ he added.
Ateneo de Manila University economist Leonardo A. Lanzona said the temporary pullback could ultimately benefit the economy if it prevents misuse of public funds.
‘As long as the remaining money is spent by the government, there should be no effect on economic growth. If we did not stop the theft, the consequences would have been far worse,’ Lanzona told BusinessMirror.
The economist noted that the country all along has been missing its targets, with or without these expenditures, and has dampened its resource collections ever since.
‘In the end, we are in a much better position since we can now use the remaining funds in projects that have greater social returns,’ Lanzona said, noting that placing them in human capital development should boost the economy at a higher rate than what it has accomplished.
Recto said the government only sees upside over the next few months, as the major government cleanup concerning the flood control controversy will result in stronger institutions, better governance and faster growth.
‘The good news is, moving forward, all of that is on the upside because we are solving the problem [on infrastructure projects]. So, moving forward, you will realize your full potential for growth,’ the Finance chief said.
Meanwhile, the DBM said the implementation of infrastructure projects is expected to accelerate in the last quarter of the year, with the end of the typhoon season and the normalization of progress billings as the DPWH puts internal controls in place.
Overall government spending as of end-August reached P3.954 trillion, up by 7.2 percent from P3.690 trillion a year ago.
Personnel services expenditures rose by 7.3 percent to P966.2 billion, while maintenance and other operating expenses rose by 11.8 percent to P724.3 billion.
As of end-August, the remaining program balance amounts to P285.3 billion or 4.5 percent of this year’s P6.326-trillion budget.