STATE underspending in 2014 likely dragged full-year growth below official targets, although a recovery in the next 12 months is expected due to low fuel prices.
According to Dutch financial giant ING, economic activity in the fourth quarter of 2014 likely improved just slightly from the previous three-month period, even with stronger-than-expected agricultural output.
“The big story for 2014 is govern ment underspending and lagging agriculture performance,” said Joey Cuyegkeng, ING economist in Manila.
For October to December, he said ING was expecting growth to have reached 5.9 percent—an improvement from 5.3 percent in the third quarter of last year. This means that for the full year, ING expects growth to average 5.8 percent—the slowest since 2011.
The slowdown in the third quarter of the year was a result of a steep drop in government spending during the period due to issues surrounding the administration’s Disbursement Acceleration Program (DAP).
Despite having been halted by the government in 2013, controversies that painted the DAP as President Aquino’s personal slush fund led to more conservative spending by the administration. This came amid massive reconstruction needs in Visayas following the damage of Supertyphoon “Yolanda” in late 2013.
The DAP’s validity was annulled by the Supreme Court in July of last year.
Also contributing to last year’s slowdown was the lower-than-expected growth of 5.7 percent—a result mainly of weak economic prospects overseas.
The government’s goal is for growth to reach at least 6.5 percent in 2014—a target that is now unlikely to be met.
Cuyegkeng said 2015 would be a better year, projecting a growth in gross domestic product of 6.7 percent.
Both the International Monetary Fund (IMF) and the World Bank share this sentiment, largely due to falling oil prices that benefit fuel-importing countries like the Philippines.
Since September, oil prices have fallen by over 50 percent due to the move by the world oil cartel, known as the Organization of Petroleum Exporting Countries (Opec), to sustain production levels despite an expected global drop in demand.