The government’s insistence on reforming the public-sector procurement process and not the alleged bureaucratic inertia may be to blame for the country’s lackluster growth performance thus far this year, according to Bank of America Merrill Lynch.
This was stressed by the investment-banking arm of the global lender Bank of America in a research note where it expressed optimism that, while the pursuit of growth-boosting infrastructure programs have been delayed by what seemed like bureaucratic foot dragging, its outcome in the years to come were to prove beneficial for the economy as a whole.
For many months prior, the government’s inability to implement an ambitious infrastructure buildup program had been blamed for below-target growth averaging only 5.6 percent in the quarter ending June this year, instead of the blistering 8-percent growth projected by government planners.
But the investment bank reiterated the government’s slow disbursement is traceable to the institutional reforms it has pursued during the period whose anticipate outcome will benefit the country down the line.
“Since 2014 the government has been criticized for underspending. Speaking with various branches of the government, however, they clarify that slow spending is not the same as underspending. In the case of underspending, the government is unable to fully consume its budget. In the case of slow spending, the budget is consumed, but not entirely within the current calendar year,” the bank’s analysts said.
“Indeed, for as long as a project had already commenced and the budget disbursed, that expenditure will proceed to completion, even extending beyond the current calendar year,” it added.
Bank of America Merill Lynch also expressed confidence government spending should accelerate from growth of only 19 percent in the third quarter and retake its position as growth driver down the line.
“The main reason for the slower spending pace may be that the government implemented reforms, particularly in the area of procurement.… As the bureaucracy goes through the learning curve associated with tighter procurement rules, the pace of spending should pick up,” the bank said.
Bank of America Merrill Lynch also said accelerated government spending averaging 19 percent in the third quarter implies strong growth for the country for that period.
“Having seen the modest pace of spending in the first half of 2015, there are doubts whether these spending growth targets can be achieved. We point out, however, that there are signs that the pace of government spending is finally accelerating,” the bank said.
The Philippine Statistics Authority (PSA) is set to release the country’s local output performance on November 26.
While several economists expressed optimism that the third-quarter growth will be higher than the 5.6 percent reported in the second quarter, observers said the Philippines will miss its growth target for the year set at the ambitious range of 7 percent to 8 percent.