The government seems to be stuck in a pattern of weak spending that may threaten the country’s growth prospects this year, Dutch financial giant ING said.
In a note to investors at the weekend, ING economist in Manila Joey Cuyegkeng noted that, since late last year, the government has spent less during the first two months of every quarter, before catching up in the third month.
“Triple dip in government spending and then a rebound at the end of each quarter is the developing pattern,” Cuyegkeng said.
This follows the release of data that showed the government nearly balanced its budget in July following a sharp decline in state spending. The government posted a budget deficit of P1.8 billion in July, down 97 percent year-on-year.
Government revenues were up 15 percent in July, while disbursements went the opposite direction with a decline of 15 percent.
July’s spending drop was a worrying sign given that government spending contributed nothing to economic growth in the April to June period of the year, data from the Philippine Statistics Authority (PSA) showed.
The government spent below program in April and May, but recovered in June with a 44-percent increase in disbursements. ING said the late surge may have been cutting it too close.
“Without the surge in government spending in June 2014, overall GDP growth would be slower likely to be in line with the prevailing consensus of 5.9 to 6.1 percent instead of the upside surprise of 6.4 percent,” Cuyegkeng said.
Major drivers of growth in the second quarter were the manufacturing sector, sustained domestic consumption, and the country’s booming services sector.
Cuyegkeng warned that the government’s weak spending “may weigh on overall 2014 growth” if the pattern of an end-quarter surge does not happen in third and fourth quarters.