Public spending expected to pick up in H2

The economy’s growth prospects for the second half of 2011 appears to be better than that seen in the preceding semester, according to the National Economic and Development Authority (NEDA).

Ruperto P. Majuca, assistant director-general for planning and policy of NEDA, said in a phone interview that government spending would soon accelerate and the effects of “temporary setbacks” and “outside shocks,” including oil price volatility, should taper off.

However, Majuca declined to give an estimate of the economy’s growth, in terms of gross domestic product (GDP), for the second half. NEDA is still preparing its official forecast due next week, Majuca explained.

Combined with seasonal spending for the yearend holidays, businesses may look forward to brighter prospects in the second half, Majuca said.

“We expect that in the third quarter, economic activities with Japan will normalize and we can participate in their reconstruction. (The NEDA staffs) are studying what kind of goods, for example, they may need from us,” he said.

Also, oil prices are not expected to go down significantly although it may be more stable in the third and fourth quarters, Majuca said.

Socioeconomic Planning Secretary Cayetano W. Paderanga Jr. said earlier that the Philippine government is accelerating spending on infrastructure to ward off the ill effects of the US credit downgrade and other outside shocks.

Most economists believe that for the Philippines to hit its target annual GDP growth of 7 to 8 percent, it has to invest heavily.

Benjamin E. Diokno, former budget secretary and a professor of economics at the University of the Philippines, said in an e-mail that government underspending is “unsustainable because it has to invest heavily in public infrastructure in order to catch up with its Asian counterparts.”

Diokno warned that with rising uncertainty in the global economy, consumers might cut back on consumption.

With slowing consumption, there is no incentive for investors to invest in new plants or new businesses, Diokno explained.