MANILA, Philippines —Government spending will likely speed up economic growth this year, with state expenditures expected to swell by 7 to 8 percent despite a slump in the fourth quarter of 2023, according to Swiss banking giant UBS Investment Bank.
UBS Global Research on Wednesday maintained its 5.7 percent gross domestic product (GDP) growth forecast for the Philippines on the back of better consumption and public-private partnership (PPP) investments.
While the government works to narrow the budget deficit, UBS noted that capital outlays would “accelerate modestly” this year.
“Big-ticket PPPs, including the airport, if they do come through, could be another source of growth,” said Grace Lim, UBS senior economist for Southeast Asia and Asia, referring to the upcoming upgrade of the Ninoy Aquino International Airport. The P170.6-billion rehabilitation contract was awarded earlier this month to a consortium led by conglomerate San Miguel Corp.
Underspending
In November 2023, lower infrastructure spending pulled down overall state expenditures by 20.4 percent year-on-year to P77.8 billion.
READ: Low infra spending in Nov further shrunk total gov’t outlay
Direct government spending on infrastructure projects slumped by 29.4 percent to P56.7 billion, with the Department of Budget and Management pointing to “different timing of big-ticket disbursements” as the main reason behind the decline.
This subsequently weakened state contribution to economic growth, slowing down to 5.6 percent from the 7.6-percent rate in 2022.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., told the Inquirer that it was still possible for the government to boost infrastructure spending, especially with the 2025 midterm elections close by.
According to him, voters will likely look for achievements in the form of completed infrastructure projects among those seeking a government post next year.
Some government offices, especially those with officials planning to run for reelection, “would expedite and complete [projects] before the 2025 midterm elections,” Ricafort said.
Flagship infra projects
But even with around 72 flagship infrastructure projects in the works, Lim explained that it may take years for these to actually contribute to spending and growth.
“Most of these projects will be completed beyond 2028, so that’s not something that will all come through in just one year,” she said.
READ: Marcos revamps flagship infra list
At the same time, Lim said resilient consumption, particularly among households, would help buoy overall economic growth.
In the fourth quarter of last year, household consumption grew by 5.3 percent, faster than 5.1 percent in the previous quarter.
“Despite inflation headwinds, consumer spending remained resilient,” Lim said, citing the country’s record-low unemployment rate at 3.1 percent in December as the key driver. —Meg J. Adonis