BENIGNO Aquino 3rd graduated from the Ateneo de Manila with a Bachelor of Science degree in Economics in 1981. Given his academic background, the President would have been expected to know that the government in a poor country like ours provides the main stimulus for progress.
Sure, we often hear politicians—and others—spout slogans that describe the private sector as “the engine of growth.” In fact, industrialists, traders and professionals—not to mention the 1.5 million civil servants—rely on the government for their businesses and livelihood.
Even in more developed economies, the government is occasionally expected to—as another cliché puts in—pump prime the economy. In short, the money forked out by state agencies is what gets the economy going.
In public works projects, for instance, government deals allow private contractors to hire workers, buy cement, aggregates, steel and other inputs, which in turn are made and/or traded by other businessmen and workers. When completed, public works—like roads, bridges, irrigation canals, etc.—facilitate the movement of people, goods and produce further enhancing production and commerce.
The benefits from spending on public works are so obvious one doesn’t need an Ateneo economics degree to see them. For some reason, however, Mr. Aquino and his administration have withheld the release of funds—which they had requested from the Congress—that have already been earmarked for public works and other projects.
Of course, the President is obliged to ensure that government funds are properly spent, and his aides have volunteered the excuse that Mr. Aquino is determined to eliminate corruption in government projects. However, the dogmatic implementation of the administration’s Matuwid na Daan platform could leave the country with no roads at all.
Opposition lawmakers have been raising the alarm over Malacañang’s refusal to release the bulk of 2011 budget—or about P1 trillion of the P1.6 trillion approved by the Congress under the General Appropriations Act (GAA) for 2011. The anxiety over the adverse consequences of the administration’s parsimony has been validated by recently released figures that show a disturbing economic slowdown.
Official data released Wednesday showed that from April to June the growth of the Philippine economy decelerated to an annual rate of 3.4 percent—well below the administration’s target of 4.5 to 5.5. percent. Worse, the National Statistical Coordination Board downgraded the first quarter growth rate to 4.6 percent year-on-year from the 4.9 percent it had announced originally.
Administration spokesmen were quick to blame the Eurozone crisis and the economic problems of the country’s other main trading partners for the disappointing domestic growth rate, which was far below the 8.9 percent posted in the second quarter of 2010.
Given the administration’s stinginess, independent economists, expressed no surprise. They observed that whatever growth the economy experienced in the second quarter of 2011 was due to household final consumption expenditure, or HFCE in economist jargon, made largely possible by the remittances of Filipinos working overseas. They also observed that government final consumption expenditure, or GFCE, from April to June was less than the figure for January to March, again as a result of the administration’s overly cautious approach to spending, especially in infrastructure development.
Also pulling down the rate of gross domestic product, or GDP, growth was the likelihood that the country imported more goods than it exported. In addition, both domestic and foreign direct investments hardly grew.
Their conclusion: the administration has turned the government into a non-factor in economic growth.
There are signs though that the administration has begun to accept its mistake and that the economy could expect to get a boost in the remainder of the year.
In a press statement, Budget and Management Secretary Florencio Abad was quoted saying Wednesday that the government may “front-load” projects for implementation next year this second semester to raise economic growth—in addition to accelerated spending to meet the spending targets approved in the 2011 GAA.
“We intend to further increase spending not only by accelerating existing projects but also by spending on additional projects allowed by the available fiscal space brought about by significant savings we have attained,” Abad was quoted saying Wednesday.
Among the additional projects being considered are the hiring of nurses and healthcare workers, rural electrification projects, infrastructure for agrarian reform, aquaculture support, on-site housing and resettlement, local roads connecting to national roads, farm-to-market roads and additional national roads and bridges, Abad said.
Another administration official, Socioeconomic Planning Secretary Cayetano Paderanga acknowledged in a TV interview that the government needs to spend more on public works in order to offset the feeble global economic recovery and other external shocks. “We’ll catch up with our spending program,” the government’s chief economist promised.
Paderanga, however, could not help offer excuses for the government’s poor performance in the first half of 2011 on the economic front. He claimed that public works projects encountered “bottlenecks” that impeded fund releases. Government agencies have had to review project cost estimates and audit some ongoing projects to remove corruption, he said.
“When they were reviewed, some projects slowed down and some were kept on hold,” Paderanga said. “But now that it’s done, we can go ahead and finish the projects.”
Will the year-end holidays offer better economic figures?
Filipinos can only hope that their economist-president and his team would give them something to cheer about around Christmastime.
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