Coloma: Govt to step up spending to reach 2014 growth target
The economy lost significant momentum in the third quarter of the year in what the Cabinet of President Benigno S. Aquino 3rd quickly acknowledged as a challenge to the government’s growth target for full-year 2014.
Presidential Communications Secretary Herminio Coloma Jr. told reporters on Thursday the government will step up spending during the remainder of the year to arrest the slowdown in economic activity.
Coloma made the statement after the National Economic Development Authority (NEDA) announced the country’s gross domestic product (GDP) growth slackened to 5.3 percent year-on-year in the July-September period. The new rate marks the slowest pace of growth for a quarter since the fourth quarter of 2011. (See related stories on B1)
The slowdown sent the country falling to fourth place from its previous second place in the list of the fastest growing economies in Asia, behind China, Vietnam and Malaysia.
The third-quarter performance also stands far below the range of a 5.7 percent to 7 percent expansion forecast for the quarter by analysts, as well as the actual 6.4 percent achieved in the second quarter and 7 percent posted a year earlier.
NEDA chief and Economic Planning Secretary Arsenio Balisacan reported that the third-quarter economic figures showed a mixed picture of the private sector treading a more stable upward trajectory, government adjusting to new spending protocols and the negative impact of Super Typhoon Yolanda and other calamities lingering.
Once again, government underspending was mentioned as having dragged the economy in the third quarter after the controversy surrounding the Disbursement Acceleration Program (DAP) of the government led the Supreme Court to declare the program unconstitutional.
Balisacan pointed out that public construction contracted from double-digit growth of 19.1 percent in the comparative period to negative 6.2 percent in the third quarter of this year.
“Most of the delays were due to lags in the submission of documentary requirements by the concerned agencies,” he said, adding however, “This year, the GAA (General Appropriations Act) is now considered a release document, for certain big ticket items, the GAA stipulates certain conditions prior to budget release.”
Coloma said there has been no proven, direct correlation between the halting of the DAP and the economic downturn, stressing that projects under DAP can be bankrolled using a supplemental budget.
“There is no such finding yet. What was said is that we need to adjust to spending protocols in compliance with the spirit of the Supreme in line with our Court ruling. That’s why unobligated funds were included in the proposed supplemental budget,” Coloma explained.
Talking up the market
Shares on the Philippine Stock Exchange tumbled in reaction to the GDP results released earlier on Thursday, which dampened market optimism about the economy’s immediate prospects. The slide had much room to go as the previous day’s trade brought the benchmark index to a year-to-date high.
The Philippine Stock Exchange index (PSEi) slid 1.24 percent or 91.25 points to close at 7,265.34 on Thursday, while the All Shares index lost 1.05 percent or 45.42 points to end the session at 4,279.97.
Coloma’s statement addressed the potential blow on public sentiment of the economy’s slackening performance.
“We affirm NEDA’s continuing positive outlook in the succeeding quarters and onward to 2015. Private sector performance is expected to remain robust. Government spending is likely to improve and the impact of the post-Yolanda reconstruction efforts will gain further traction,” Coloma said.
He said the Palace shares NEDA’s optimism that the economy could still grow according to predictions of at least 6.5 percent to as high as 7 percent for the entire year.
“We expect expenditures [under the]remaining appropriated budget for the year will be fast-tracked. That’s why we remain confident that the economy will fare better in the fourth quarter and the goal set by NEDA of 6.5 percent minimum growth will be achieved,” Coloma stressed.
Among the priorities for spending are the agriculture and the economic cluster, as well as social protection and poverty reduction, which are focused on improving the plight of poor farmers and their dependents, he said.
The NEDA report indicated that growth was driven by manufacturing, trade, real estate, renting and business activities and construction, although the slowdown in sub-sectors such as financial intermediation and contractions in agriculture and public administration “tempered the pace of growth.”
Balisacan added that weakness in the agriculture sector also dragged the economy in the third quarter, with 2.7 percent.
“Palay production was adversely affected by typhoons Glenda and Luis, the onset of habagat (southwest monsoon). Regarding coconut, farms in the Visayas are yet to recover from Typhoon ‘Yolanda’ in addition to the scale insect infestation,” Balisacan added.