PPP spending seen boosting growth this year

MANILA, Philippines—Public-private partnerships (PPP) may finally be part of the country’s economic backbone this year as corporations begin to break ground after years of delays in awarding contracts.

This comes at a good time for the country, American bank JP Morgan said, noting that the state’s own infrastructure spending program had earned a reputation of being unreliable due to legal constraints.

Last year, for instance, government spending net of interest costs reached the equivalent of 13.3 percent of gross domestic product (GDP), down from 15.4 percent the year before. The state’s budget shortfall, used as a measure for how faithful the government is to its own spending plan, stood at 0.6 percent of GDP, lower than the programmed 2 percent.

For 2015, the fiscal deficit target is programmed at 2 percent of GDP, with non-interest expenditure expected to reach 16 percent of GDP, “though the risks are that this could fall short of the targets,” JP Morgan said in a note to clients this week.

Weak spending last year was likely a result of the Supreme Court’s annulment of the administration’s Disbursement Acceleration Program (DAP), which facilitated spending in past years, JP Morgan said. Though there were no plans to use DAP measures in 2014, the decision still made administration officials more careful.

Despite the spending drop, the economy still performed well, growing 6.1 percent in 2014. “The implication here is that the private sector has stepped up despite the drag from the public sector,” JP Morgan chief Southeast Asia economist Sin Ben Ong said.

This year, he said PPPs were expected to play a more significant role in driving the economy. He estimated that money spent on PPPs by the private sector could add 2 percentage points to GDP.

About P553 billion worth of projects such as new tollroads, airports, classrooms and hospitals under the PPP scheme, one of the pillars of President Aquino’s economic agenda, would be rolled out this year, administration officials have said. Paolo G. Montecillo