STATE spending on infrastructure rose in August but the Budget department said the government is unlikely to catch up with the full-year target after underspending earlier this year.
This year’s deficit target is expected to be missed due to the government’s failure to spend as fast as programmed. Debt watcher Fitch Ratings recently said this year’s deficit would likely hit 1.7 percent of gross domestic product (GDP) and an analyst said the full-year figure could be nearer to 2014’s dismal result.
A Budget department disbursement report released on Wednesday showed state infrastructure expenditures and other capital outlays were up by 29.2 percent at P25.4 billion from the P19.7 billion spent in August last year, bringing the year to date tally to P214 billion, 21.5 percent higher compared with the P176 billion seen in the same period last year.
August’s growth, however, was a marked slowdown from July’s 92.9 percent expansion to P38.3 billion.
Spending for the armed forces’ modernization was said to be the main driver in July. For August, the Budget department said infrastructure spending could be traced to programs under the Department of Public Works and Highways (DPWH), Department of Education (DepEd), Department of Agriculture (DA) and the Department of Tourism (DOT).
“The robust growth was made possible by the additional construction works of the DPWH under its various convergence programs such as that with DepEd for the school building program, that with DA for the construction of farm-to-market roads, and that with DOT for roads-to-tourist destinations, as well as by the settlement of its payable for completed CO (capital outlays) projects,” it said.
Total government spending for the eight-month period was P1.444 trillion, increasing by 11.4 percent from the previous year’s P148 billion.
With this, the Budget department said just P208.3 billion of this year’s P2.606-trillion national budget needed to be disbursed. It added that a large portion of this balance would be forwarded to agencies toward the end of the year.
“While the underspending recorded in the previous months may no longer be fully recovered, the accelerating timing of payments, mostly for infrastructure and maintenance expenditures, due to the measures being undertaken by agencies as mentioned above should contribute to bolstering domestic economic activity in the coming months,” it said.
Fitch: deficit goal to be missed
Given the government’s continued failure to meet its spending plans, Fitch said this year’s deficit goal of 2 percent of gross domestic product would likely be missed.
“Fitch forecasts a general government deficit of 1.7 percent of GDP in 2015, assuming the government will miss their expenditure plans by more than their revenue targets,” the ratings firm said in a recent report.
Fitch expects revenue collection and budget execution to improve compared with 2014, but not enough to meet the government’s “ambitious” targets.
The government missed its 2014 deficit target of 2 percent by a substantial margin, recording a full-year result of just 0.6 percent.
Public expenditures in 2014 amounted to P1.98 trillion or 13 percent below target, while revenues fell below target by 5 percent at P1.91 trillion.
For this year, the revenue target is P2.275 trillion and P2.558 trillion for disbursements, and so far the government is again well behind.
The budget gap as of August was P3.4 billion, well below the P197.2 billion targeted for the period and the year’s P283.7-billion goal. Total revenues for January to August hit P1.440 trillion versus expenditures of P1.444 trillion.
Fitch said it considered the government’s narrow revenue base as a credit negative for the Philippines.
“Difficulties collecting additional revenue limit the government’s ability to manage public finances when faced with a shock … Lower oil prices have also weighed on customs revenues,” it said.
An economist from the Bank of the Philippine Islands (BPI) shared Fitch’s view.
“This is consistent with our view as bottlenecks in the allocation and approval processes continue to cap national government outlays,” BPI lead economist and Vice-President Emilio Neri Jr. said on Wednesday.
Neverthess, Neri said that an economic growth of at least 5.5 percent still appears viable this year even if spending falls below target. His forecast, however, is well below the government’s 7 percent to eight percent target.
A Security Bank Corp. (SBC) economist, meanwhile, said Fitch’s 1.7-percent deficit projection was not doable.
“I don’t think the government can even touch 1 percent deficit as a share to GDP this year at the rate they are going,” SBC economist Patrick Ella said.
Fitch, which said it would be closely monitoring whether government reforms are able to deliver lasting revenue improvements, last month revised its outlook for the country to positive from stable.