Metrobank Research: Election spending not enough for inclusive growth

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The 2016 national elections are expected to raise government and private spending and such expenditures traditionally boost the national economy, but such activity alone will not be enough to achieve inclusive growth in the country, Metrobank Research said.

“Based on historical data, increased spending, especially before elections, influence domestic economic growth,” the think tank of Metropolitan Bank and Trust Co. said in a research note.

Citing the 2013 local elections as an example, Metrobank Research said economic managers attributed the strong 7.8 percent rate of growth in the first quarter of that year to election-related spending, with government expenditures reaching P584 billion in the second half of 2012.

However, it added: “GDP [gross domestic product]growth as a result of election-spending, while indeed significant, is also not sustainable if government expenditures eventually dry out after the period.”


When government spending started to slow in the second half of 2013 and continued to diminish in 2014, GDP in the first three months of the year showed a slowdown to 5.3 percent from the previous quarter’s 6.5 percent, it said.

The pace of growth in the local economy gained some momentum to reach 6.4 percent in the second quarter of 2014, but eventually moderated to 5.3 percent in the succeeding quarter before getting back on track at 6.6 percent in the fourth quarter of that year.

This resulted in full-year GDP growth of 6.1 percent in 2014, lower than the 7.2 percent average growth in 2013 and falling below the government’s target of between 6.5 percent and 7.5 percent.

“GDP growth last year would have been a lot higher had government spending continued to post growth after the 2013 elections,” the think tank said.

“For inclusive growth to happen, it would certainly take more than just a few quarters of election-related spending to achieve it,” it added, but gave no details on other measures that could boost economic growth.

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