By Diego Gabriel C. Robles
INFRASTRUCTURE SPENDING picked up slightly in May as the Department of Transportation (DoTr) increased payments for railway and subway projects, offsetting the lower disbursements for public works projects due to the election ban.
In a report released on Tuesday, the Department of Budget and Management (DBM) said expenditures for infrastructure and other capital outlays rose by 2.1% to P80.5 billion in May, from P78.9 billion in the same month a year ago.
The May figure is also 26.2% higher than the P63.8 billion spent for infrastructure in April, when the election ban on public works was still in place.
“This is mostly accounted by the increase in CRC (constructive receipts of cash) payments of the DoTr for the Malolos-Clark Railway Project and the Metro Manila Subway Project,” the DBM said.
It also attributed the higher spending to capital outlay projects under the Armed Forces of the Philippines’ modernization program.
This helped partly offset the lower disbursements by the Department of Public Works and Highways (DPWH) due to the election ban, as well as other one-off capital expenditures, such as the construction of the Senate building, the DBM said.
The ban on public works projects for the May national elections began on March 25 and ended on May 8.
In the five months to May, infrastructure and capital outlays spending reached P334.6 billion, inching up by 0.7% from P332.3 billion spent in the same period last year.
Analysts anticipate infrastructure spending to pick up in the next few months, given the Marcos administration’s signal of continuity.
“I think, given upcoming and renewed contracts for infrastructure projects, capital expenditure by [the] National Government will tend to increase in the succeeding months and years. As there is conscious effort from government to continue the ‘Build, Build, Build’ program, the trend may continue,” said Asian Institute of Management economist John Paolo R. Rivera.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said rising debt stock and limited financial resources may force the government to prioritize major infrastructure projects.
Nonetheless, “increased government spending especially on infrastructure would still be a major driver of economic growth, [a] source of more jobs, as well as other business opportunities,” he added.
The budget deficit declined by 18.99% to P458.7 billion in the first five months of 2022.
As of end-March, the country’s debt-to-gross domestic product (GDP) ratio stood at 63.5%, beyond the 60% threshold prescribed by multilateral lenders to developing economies.
Economic managers are aiming to bring down the debt-to-GDP ratio to 61.8% by yearend. The debt-to-GDP ratio is expected to steadily drop to 61.3% by next year all the way to 52.5% by 2028.
‘BUILD, BUILD MORE’Meanwhile, a congressman’s proposal to institutionalize the government’s infrastructure program has drawn mixed reactions from experts.
Albay Rep. Jose Maria Clemente “Joey” S. Salceda recently filed a House Joint Resolution No. 6, which introduced the “Build, Build More” (BBM) infrastructure program. It would earmark 5-6% of GDP for infrastructure spending annually, consistent with the Marcos administration’s medium-term target.
“Continuing a massive infrastructure program at a time of limited fiscal space and broad economic distress among the population is not a good policy direction for the new government,” said Terry L. Ridon, a public investment analyst and convenor of think tank InfraWatch PH.
“It is tone-deaf to the day-to-day problems of the public, and certainly, this should not be adopted by Malacañang at this time.”
On the other hand, ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa acknowledged the necessity of spending in infrastructure to improve the Philippines’ competitiveness.
However, “the issue now becomes how the government intends to fund the investment needed by the economy. The government must balance the need to push for infrastructure investment while ensuring the long-term fiscal health of the economy,” Mr. Mapa said in an e-mail.
“As long as authorities can ensure that financing will ensure that spending on building can be done simultaneously as fiscal consolidation, ‘Build, Build, Build’ and all its derivatives will be welcome,” he added.
UnionBank of the Philippines Chief Economist Ruben Carlo O. Asuncion said in an e-mail the measure sends the right signal to investors and stakeholders as it “communicates stability and continuity.”
For 2023, Mr. Salceda estimates infrastructure spending to reach P1.21 trillion or 5% of GDP. By the final year of the Marcos administration in 2028, he projects it to reach P2.25 trillion or 6% of GDP.
“[The amount of] P2.25 trillion is currently better spent funding the new government’s social agenda such as continuing cash aid to marginalized families, free education, affordable healthcare, and housing. It can also be better spent improving current infrastructure in actual problem areas, such as the EDSA bus carousel and other metropolitan centers visibly distressed by traffic and other bottlenecks,” Mr. Ridon said.
It is still unclear how the Marcos administration will fund another round of massive infrastructure investments, he added.
To achieve the infrastructure spending targets, Mr. Asuncion said the government should maximize public-private partnership projects.
“I think it’s possible if the private sector and foreign investors will be part of the equation,” he said.