COVID-19 shadow loomed large over decline of first quarter infra spending

Public infrastructure spending rose in March, but first-quarter total fell year-on-year and below target, squeezed partly by the COVID-19 lockdown that started middle of March and froze major projects, the Department of Budget and Management (DBM) said.

In a report on Monday (May 25), the DBM said the national government’s disbursements for infrastructure and other capital outlays last March increased 4.1 percent to P62.2 billion from P59.7 billion in 2019 and jumped by a faster 36.4 percent from P45.6 billion in February.

The increase in disbursements in March was for right-of-way for the Light Rail Transit (LRT) Cavite extension and Metro Manila Subway project of the Department of Transportation (DOTr) and direct payments made to suppliers of projects funded by Official Development Assistance (ODA) money.

The DBM nonetheless said the government could have had spent more on infrastructure that month, but disbursements were “dampened by lower Department of Public Works and Highways (DPWH) disbursements” as a result of delays in construction caused by COVID-19 lockdowns in Luzon.

Total infrastructure spending in the first quarter was P156.1 billion, down 12.4 percent from P178.1 billion in the first three months of 2019.

The end-March amount spent on infrastructure was also 18.3-percent lower than the P191.1-billion goal for the three-month period.

The DBM said the decline in disbursement was caused by the “base effect of high infrastructure expenditures” in 2019 and “temporary suspension of construction activities” because of enhanced community quarantine (ECQ) against COVID-19.

Underspending on infrastructure in March was also partly due to “the combined effects of the delays” in budget requests and submission of documents needed to release funds.

Movement restrictions during the ECQ stopped both public and private construction activity in areas accounting for about 70 percent of the domestic economy.

For instance, the Inter-Agency Task Force on Emerging Infectious Diseases (IATF-EID) had thumbed down the economic team’s earlier proposal for implementing agencies to continue construction of big-ticket infrastructure projects even as there was a lull in other economic activities during the lockdown.

Under modified enhanced community quarantine (MECQ), some infrastructure projects were allowed to resume as long as complying with minimum safety standards.

This month, the Cabinet-level Development Budget Coordination Committee (DBCC) reduced the infrastructure spending program for 2020 to P725.1 billion or 3.8 percent of gross domestic product from the earlier program of P800.6 billion or 4.1 percent of GDP last March.

This year’s updated infrastructure budget was below the P1.05 trillion spent by the government last year.

First-quarter gross domestic product (GDP) declined by 0.2 percent and economic managers had said that one way to post a “V-shaped” recovery after the recession will be through the ambitious “Build, Build, Build” infrastructure program, which the government was currently reviewing to immediately resume the “most impactful” flagship projects.

In his ninth Bayanihan to Heal as One Act implementation report submitted to Congress last Monday, President Rodrigo Duterte said the Economic Development Cluster (EDC) was “re-prioritizing Build, Build, Build.”

The thrust, however, would have these criteria—fiscal space for infrastructure projects from 2020 to 2022; project readiness and implementation capacity of line agencies; economic growth and jobs impact of projects; interest and risk level of the private sector and inclusion of health and digital economy projects to address emerging needs from COVID-19 and the new normal.

Edited by TSB