Government underspending main culprit in slower-than-expected 5.3% G.D.P. expansion

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The government failed to deliver on its promise to increase public spending at the start of the second semester, causing the economy to lose the much-needed momentum to meet the government’s growth target this year.

Other factors, such as the contraction in the agriculture and financial intermediation sectors, also caused the Philippine economy to grow by only 5.3 percent in the third quarter, the slowest since the third quarter of 2011, when gross domestic product (GDP) grew by only 3.2 percent.

The GDP figure in the July-to-September period is lower than the 6.4 percent recorded in the second quarter and the 7 percent posted a year ago

Socioeconomic Planning Secretary Arsenio M. Balisacan said the “chilling effect” created by the unfavorable decision of the Supreme Court on the Disbursement Acceleration Program (DAP) and the recent issuances of disallowance by the Commission on Audit (COA) caused public spending to contract by 2.6 percent in the third quarter.

“We realize and we recognize the decision on the DAP and also the COA’s interest in, drive in issuance of notices of disallowance, I think, is putting a chilling effect on the bureaucracy and that has [partly caused] the slow-down in the [economy],” Balisacan said in a press conference on Thursday.  Balisacan said this “chilling effect” has also caused delays in various projects, including those targeted to be implemented in areas affected by Supertyphoon Yolanda.

However, Balisacan said the negative impact on the government’s spending is a result of the institutional changes that the Aquino administration is implementing in government.

“As we say, no pain, no gain,” Balisacan said. “That should be seen in the context of the medium-term to long-term. These benefit us in terms of sustainability of high-end growth.”

With this, Balisacan said government agencies will have to be adequately prepared to comply with new protocols.

He added that the government also needs to improve the country’s resilience against disasters—through better preparedness, through adaptation, through adequate social protection and through having a faster response mechanism.

Local businessmen blamed the congestion in major ports in Metro Manila for lower national output in the July-to-September period.

“The lower GDP was significantly impacted by the port congestion and containers offloaded in outside ports such as Hong Kong, Singapore, Kaosiung in Taiwan. The low end of the GDP target can be met with continued port decongestion, no power brownouts, and reinforcing industry confidence,” Semiconductor and Electronics Industries of the Philippines Inc. President Dan Lachica said.

Balisacan said, however, that he remains confident that the country will still be able to meet its aim of growing faster and attracting more foreign direct investments in the long term.

Despite the disappointing GDP figure in the third quarter, he said the country’s long-term trajectory of economic growth is on the uptrend.

Balisacan said that in the 1990s, the country’s average economic growth was around 3 percent while in the early 2000s until 2009, growth averaged 4.5 percent. Starting 2010, the country’s average growth rate was at 6.3 percent.

This growth, Balisacan said, has been fueled by increased investments, growth in the manufacturing sector and the tourism sector.   He said the National Economic and Development Authority which he also heads is now in the process of crafting a long-term plan for the Philippines to achieve first-world status.

Balisacan said the 30- to 40-year plan can help future governments in crafting their medium-term economic and investment blueprints in the future.  Makati Business Club Executive Director Peter Angelo V. Perfecto, for his part, called on the government to put in place better transport infrastructure and to address port congestion.

“It may be too late to make a difference for the year-end rates but further delay in addressing ports congestion for example may extend the downward trend [of GDP growth] into 2015,” Perfecto said.

Finance Secretary Cesar V. Purisima noted that the 5.3-percent growth in the GDP for the third quarter has put the Philippine economy on a record 11 straight quarters of above 5-percent economic growth.

Purisima said the government would have to further increase investments on infrastructure and services like health, education and social services to boost economic growth.

This was not the first time the Aquino administration’s low spending has affected the country’s economic growth.  In 2011 the government’s slow spending for construction projects, including public-private partnership projects, caused the Philippine economy to post a full-year growth of only 3.7 percent.

Data from the Philippine Statistics Authority showed that the country’s first-quarter growth in 2011 was at 4.6 percent; second quarter, 3.4 percent; third quarter, 3.2 percent; and fourth quarter, 3.7 percent.

(With Catherine Pillas and David Cagahastian)

 

 

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A professional journalist for over a decade, Cai U. Ordinario currently writes macroeconomic and urban development stories for BusinessMirror. She has received awards for excellence in reporting on the macroeconomy and statistics. She was also cited for her contribution to statics reporting by the National Statistical Coordination Board (now the Philippine Statistics Authority). She is a recipient of journalism fellowships including the Jefferson Fellowship from the Honolulu-based East West Center. She is currently completing her Masters degree in Communication at the University of the Philippines. She graduated with a degree of Bachelor of Arts Major in Journalism from the University of Santo Tomas.