Low infra spending in Nov further shrunk total gov't outlay

Low infra spending in Nov further shrunk total gov’t outlay

MANILA, Philippines —Infrastructure spending sagged in November last year, contributing to the contraction in overall state expenditures in the final quarter of 2023 amid the need to keep the budget deficit within limit.

Data released on Friday by the Department of Budget and Management (DBM) showed capital outlays fell 20.4 percent year-on-year to P77.8 billion in November. Of that amount, direct government spending on infrastructure plummeted 29.4 percent to P56.7 billion.

Explaining the slump, the DBM pinned the blame on “different timing of big-ticket disbursements” in the Department of Public Works and Highways in November, as actual payments for some projects were likely to have been made in December instead.


At the same time, there was a decline in payments made by development partners like multilateral lenders for foreign-assisted infrastructure projects, DBM said, particularly for the Malolos-Clark Railway Project and the North-South Commuter Railway Project. Both railway projects are backed by the Asian Development Bank.


Zooming out, the decline in infrastructure outlays in November contributed to the 1.8-percent drop in government spending in the fourth quarter of 2023, which weakened the state’s support to the gross domestic product (GDP).

Last year, the Philippine economy expanded at an annualized 5.6 percent, missing the government’s 6-percent to 7-percent target.

READ: Marcos admin misses 2023 target with 5.6% GDP growth

Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines, said robust spending on infrastructure would make the government a more reliable source of GDP growth. Data showed the 11-month spending on infrastructure amounted to P1.02 trillion, 18.5-percent higher than a year ago.

Significant contribution

“Spending more on infrastructure, for sure, will sustain the (government’s) significant contribution to GDP. The lower infrastructure expenditure is in line with the slower [fourth quarter 2023] GDP growth contribution of government consumption. We expect this even for December,” Asuncion said.

”This also confirms our observation that the national government has indeed prioritized debt and budget deficit management, preventing any deterioration of fiscal position that would impact the country’s current sovereign credit rating,” he added.


READ: PH budget deficit seen further narrowing in 2023, 2024

The Marcos administration is hoping to supercharge infrastructure spending to 5 percent to 6 percent of GDP. Past administrations have tried to bridge the Philippines’ wide infrastructure gap in a bid to attract more investments, especially in the countryside.

READ: PH debt still manageable, says Finance chief

The government will publish a complete report of its 2023 fiscal performance this month or in March, which should give a clearer picture of how state spending contributed to last year’s growth. Ahead of that much-awaited data release, the DBM said “the recovery of spending performance during the second half of 2023 is notable.”

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This, alongside the cooling of inflation, will hopefully help buttress a strong 2023 GDP growth outturn and put in place a more enabling macroeconomic environment for 2024,” the department said.

TAGS: Infrastructure

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