The government posted a rare budget surplus in May, raising fears that the expected boost in economic growth from higher public spending could come too late in the year. AFP FILE PHOTO
MANILA, Philippines–The government posted a rare budget surplus in May, raising fears that the expected boost in economic growth from higher public spending could come too late in the year.
As spending dipped and collections rose, the fiscal performance last month pushed the government’s fiscal position for the first five months of 2014.
This comes amid the need for aggressive spending to rebuild roads, bridges, schools, and other vital infrastructure damaged by the super typhoon that hit the Visayas last year.
“The contraction in spending points to slowing growth momentum in the second quarter,” HSBC economist Trinh Nguyen on Thursday said, commenting on the data released by the Department of Finance (DOF).
Official data released Thursday showed an P11.8-billion fiscal surplus in May—a reversal of the budget shortfall registered in the same period last year.
“We have to worry if this reflects a slow pace of government response to reconstruction needs in disaster-hit areas and continuing sluggishness in moving the infrastructure program,” Ateneo de Manila economist Cielito Habito said separately.
The May turnout resulted in a year-to-date surplus amounting to P8.5 billion, a turnaround from the aggregate deficit position that government has had since April 2011. May marked the second consecutive month the government posted a surplus—meaning it made more money than it spent.
For the whole year, the government expects its budget deficit to reach P266 billion, or the equivalent of 2 percent of gross domestic product.
Nguyen said slow spending in the second quarter was the latest in a string of recent indicators that suggest a further slowdown in the three months to June. “April expenditures contracted, remittance growth decelerated, and net exports widened,” she said in an interview.
HSBC expects the economy to grow by 5.6 percent in the second quarter, slower than the 5.7 percent reported in the first quarter. The government is targeting an expansion rate of 6.5 to 7.5 percent this year. Last year, the economy grew by 7.2 percent.
The DOF on Thursday reported that revenue collections for the month were up 12 percent due largely to the efforts of the Bureau of Internal Revenue and the Bureau of Customs. Expenditures in the same period were down 4 percent.
The dip in spending came despite a 41-percent increase in interest payments for government obligations, implying that the level of disbursements was held back by the slow implementation of projects.
Earlier this month, Budget and Management Secretary Florencio Abad said that the completion of the government’s comprehensive reconstruction plan in the Visayas had been delayed as officials tried to adhere to the “build back better” principle.
This meant that rehabilitation of areas affected by the super typhoon would be done with future disasters in mind. Sticking to this principle will entail designing projects in ways never done in the country, making it more time-consuming, Abad said.
“The latest fiscal data suggests that we simply have to get out of the business-as-usual mode in pushing infrastructure development,” Habito said.
“I’m sure our economic managers recognize this, and we should see dramatic adjustments soon,” the former socioeconomic planning secretary said.
Originally posted at 2:52 pm | Thursday, June 26, 2014