Catch-up Spending Pays Dividends
I have been saying that the Philippine economy is doing just fine despite the US-China trade war and the blip in the first and second quarters this year, when it merely expanded 5.5 percent.
Growing above 5 percent or just below 6 percent this year is actually not bad because the Philippine economic expansion remains one of the fastest in Asia. But from the looks of it, and based on the enthusiasm of our economic managers, the economy may pull a little surprise on the critics of the administration.
Our economic managers in the middle of this year unveiled a catch-up spending plan to reinvigorate the economy and put it on track with this year’s target range of 6 percent to 7 percent. Coupled with the initiatives of the Bangko Sentral ng Pilipinas to reduce interest rates, the catch-up plan seems to be paying dividends.
The budget deficit jumped 86 percent in September to P178.6 billion from P96.2 billion a year ago after a 39-percent increase in government expenditures. Bureau of Treasury data showed that expenditures in September reached P415.1 billion, up from P298.6 billion in the same month last year, while revenues increased 16.9 percent to P236.5 billion from P202.4 billion.
The big-spending in September meant that the government was able to hike the gap in the first nine months to P299 billion, just 18 percent short of the programmed deficit of P364.7 billion for the period. The Treasury noted that government spending continued to pick up and notched its highest monthly growth “while revenue growth was second only to May of this year.”
The national government, according to the Treasury, continued to catch up with its spending plan for the year where 71.2 percent of the P3.769-trillion full-year program is to be disbursed as of end-September despite the delay in the passage of the 2019 budget and the election ban in the earlier part of the year.
Finance Secretary Carlos Dominguez III is bent on spending to sort of pump-prime the economy. The government is set to spend around P1.14 trillion in the last quarter to achieve its total program disbursement target of P3.769 trillion for 2019.
He is confident the government will hit its spending target this year based on the updates of the government’s main infrastructure agencies. Members of the economic development cluster of the Cabinet have recently met to mainly discuss the progress of the catch-up spending plan in order to spur further the growth of the economy. The Public Works Department is also confident of delivering on its P725-billion disbursement target for the whole of 2019.
“For the first nine months of 2019, so far it has disbursed a total of P424.7 billion. Secretary [Mark] Villar said the P300.3-billion target for the last quarter is attainable,” according to Secretary Dominguez.
The accelerated government spending means more Filipinos are being hired, especially in the construction sector. This will result in higher consumer spending and bolster economic growth. I share the optimism of Secretary Dominguez that with the inflation rate finally reined in, the economy will gather pace toward the end of the year.
The economy, says the finance chief, is expected to expand at a higher clip over the remaining months of 2019 as inflation stays within the official target range of 2 to 4 percent while the government accelerates implementation of the “Build, Build, Build” infrastructure and human capital development projects.
I noted the same upbeat mood of the BSP, which now sees the full-year economic growth hitting near the lower end of the target range of 6 percent to 7 percent because of the government’s accelerated spending and the slowdown in the inflation rate.
BSP Deputy Governor Francis Dakila has confirmed the government’s catch-up spending scheme is supporting the growth momentum for the rest of 2019.
“With the recovery in government spending, we see an acceleration in liquidity growth toward the end of the year. The fourth quarter will be stronger because of the acceleration of government spending coupled with the [high seasonal] spending during the Christmas season,” says Dakila.
I guess I wouldn’t be surprised anymore if the economy expands at least 6 percent this year. I will not argue with the bullishness of our economic managers.