THE drop in the national government’s fiscal spending is cause for worry for the country’s output growth from July to September this year, as it may derail the recovery of the economic expansion of the country as seen in the second quarter of 2014, an economist said.
In a recent research note prepared by ING Bank senior economist in Manila Joey Cuyegkeng, he expressed concern about the pattern of the government spending and its crucial impact on the growth of the country’s gross domestic product (GDP).
Cuyegkeng said that a “triple dip” pattern in government spending is seen as national government expenditures decline in two consecutive months, only to rebound at the end of each quarter.
“This is the same pattern in fourth quarter, in second quarter, and now third quarter…? Details of the weakness at the start of each quarter then a rebound remain a mystery. Government officials mentioned that the weakness in spending in April and May had to do with delays in the submission of new requirements in the 2014 GAA [General Appropriations Act], and ongoing validation of the proposed program for the rehabilitation and reconstruction of typhoon-affected areas,” Cuyegkeng said.
Spending in the months of April and May this year yielded a net surplus indicative of lower disbursements during the period. This was, however, countered by the rise in spending in June this year, which increased by 44 percent to hit a deficit of P62.5 billion.
“Without the surge in government spending in June 2014, overall GDP growth would be slower, likely to be in line with the prevailing consensus of 5.9 percent to 6.1 percent, instead of the upside surprise of 6.4 percent,” Cuyegkeng noted.
“With the rebound in June spending, we had assumed that the government had finally addressed the issue. But here we are again, July spending dropped 15 percent year on year,” he added.
The Department of Finance earlier this week reported a national government deficit of P1.8 billion, down by 97 percent from the deficit during the same period last year.
“The outperformance of the fiscal deficit is largely the result of weak spending, which may weigh on overall 2014 growth if the pattern of an end-quarter surge does not happen in the third quarter and fourth quarter,” Cuyegkeng warned.
The Philippine Statistics Authority earlier reported that the Philippine economy grew by 6.4 percent in the second quarter this year, up from the revised 5.6-percent growth in the first quarter of the year.