Infrastructure News

Infrastructure spending down in Nov.

Infrastructure spending dropped for the fifth straight month in November amid the pandemic. — PHILIPPINE STAR/MICHAEL VARCAS

By Beatrice M. Laforga, Reporter

STATE SPENDING on infrastructure dropped for the fifth straight month in November as lockdown restrictions continued to hamper construction work.

At the same time, a think tank said the government should ramp up spending this year to drive the Philippine economy’s recovery.

Data from the Department of Budget and Management (DBM) showed infrastructure and other capital outlays declined by 50% to P40.3 billion in November from P80.9 billion a year ago.

Infrastructure spending in November was also 29.4% smaller than the P57 billion spent in October, marking the fifth straight month of year-on-year decline since June when it posted a 44.5% annual growth.

“Infrastructure and other capital outlays were down to P40.3 billion due to the various delays caused by the imposition of community quarantine measures to contain the further spread of the COVID-19 virus in early 2020, as well as the one-time expense in 2019 for the building constructions of the Land Transportation Office (LTO) and the Land Transportation Franchising and Regulatory Board (LTFRB),” the DBM said in a report on Tuesday.

In the 11-month period, infrastructure spending was still down by 22% year on year to P548.8 billion, which was attributed to the disruptions caused by the pandemic and the budget cuts implemented earlier in the year. To recall, the government realigned funds of some infrastructure projects to support its rescue programs under Republic Act 11494 or the “Bayanihan to Heal as One Act.”

Including the capital transfers to local government units and other equities, overall capital outlays reached P727.9 billion during the period, 14% down year on year. This accounted for 88% of the P825-billion infrastructure spending target for the full year.

The Budget department expects line departments to have caught up on spending in December, particularly the government’s biggest infrastructure agencies, the Department of Public Works and Highways (DPWH) and Department of Transportation (DoTr).

“Disbursements are expected to recover from the substantial underspending recorded as of end-September 2020 (7.2% below the program for the period), and close at P4.233 trillion,” it said.

In a note on Tuesday, ANZ Research said the government will have to maintain a supportive fiscal policy over the next two years to support a growth trajectory.

While it has enough fiscal space to fund its ballooning deficits, the economic think tank said the Philippine government needs to address underspending, especially for infrastructure, to realize the potential gains of its ever-increasing budget.

“In some ways, the shortfall in realized spending has been characteristic of the Philippine economy. This is particularly the case with infrastructure spending. Between 2010 and 2015, realized capital spending fell short of planned levels by around 24%. We note that the shortfall of 24% is higher than other economies in the region,” ANZ Research said in a note titled “The Philippines’ 2021 budget: delivery needs to buck up.”

Overall state spending reached P4.205 trillion at the end of 2020, up 11% year on year but fell short of its P4.23 trillion target by 0.66%, according to preliminary data presented by the Finance department on Jan. 12.

“The shortfall primarily reflects the limitations of institutional capacity to implement public infrastructure programs, in our view,” the think tank said.

This year, the government has a P4.5-trillion budget, of which P1.1 trillion will go to fund infrastructure projects.

“With these shortcomings in the background and the slow pace of economic recovery, it is imperative that fiscal delivery improves this year. Fast delivery and full utilization of budgeted amount will be critical in realizing complete pass-through of fiscal multiplier this year,” ANZ Research said.

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